Life License Qualification Program (LLQP) Practice Exam

Which statement about group term life insurance is true?

1. It requires evidence of insurability from all employees

2. It benefits only the employer

3. It pays a death benefit to the employee's beneficiary

4. It accumulates cash value over time

The correct answer is: It pays a death benefit to the employee's beneficiary

Group term life insurance is designed to provide a death benefit to the beneficiaries of employees covered under the policy. When an employee passes away while covered by group term life insurance, the insurer pays a designated amount, known as a death benefit, directly to the employee's beneficiary. This aspect highlights the primary purpose of group term life insurance, which is to offer financial protection to employees' families in the event of an untimely death. The other options do not accurately reflect the nature of group term life insurance. For example, requiring evidence of insurability from all employees typically does not apply to group term plans; these policies often provide coverage without such requirements to make it more accessible. Additionally, group term life insurance is structured to benefit employees and their families rather than just the employer. Lastly, group term life insurance does not accumulate cash value over time, which is a feature commonly associated with whole life or universal life insurance policies. Instead, group term life insurance provides pure protection for a specific term, with no cash value component.