Certified Financial Consultant (CFC) Practice Exam

For an association to provide group insurance, how many members are typically required?

1. 20 members

2. 50 members

3. 100 members

4. 150 members

The correct answer is: 50 members

In the context of group insurance, associations typically require a certain minimum number of members to establish a group that can effectively pool risk. This pooling is essential for insurers, as it allows for the distribution of risk among a larger group, which in turn helps in achieving cost-effective insurance coverage. The requirement of 50 members is common in many jurisdictions and industries because it provides a sufficient sample size to make accurate underwriting decisions. With at least 50 participants, insurance providers can lower administrative costs and provide more comprehensive coverage options while ensuring the group is large enough to create a stable risk profile. Smaller groups may not be able to provide a diverse enough risk pool, which could lead to higher premiums or limited coverage options. By having a threshold of 50 members, associations can offer affordable group insurance that is beneficial for all members involved.