Final answer:
Businesses typically use Group life insurance to provide coverage to their employees due to its cost-effectiveness and the streamlined process of risk assessment and premium determination for groups as opposed to individuals.
Step-by-step explanation:
A business will typically use Group life insurance to cover their employees.
This type of insurance is advantageous for both the employer and the employees because it can provide a basic level of insurance to all employees as a benefit of employment, often at a lower cost per individual than if they purchased the same type of insurance independently.
Also, for the insurance company, assessing risk and determining premiums for a big group is generally more streamlined than doing so for many individual policies.
In the context of setting premiums, if the insurance company were selling life insurance separately to each group, the actuarially fair premium would depend on the risk profile of each group.
If they can't evaluate the risk precisely due to a lack of information about family cancer histories, the insurance company would tend to calculate the actuarially fair premium for the entire group by considering an averaged risk that reflects the combined risk profile of all individuals in the group.
Many people have various kinds of insurance such as health insurance, car insurance, house or renter's insurance, and life insurance.
Private insurance is typically categorized as either employment-based insurance, like the group life insurance mentioned, or direct-purchase insurance, which an individual buys directly from a private company.
Unlike term or whole life insurance, group life policies don't generally build cash value for individual employees but do provide a death benefit.