What defines a "natural group" for group life insurance?

A "natural group" for group life insurance is characterized by its formation for legitimate social or occupational reasons rather than solely for the purpose of obtaining insurance. This definition is important because it ensures that the group has a basis beyond just acquiring coverage, which makes the risk pool more stable and reflective of real-life dynamics.

Groups such as employee unions, trade associations, or professional organizations illustrate natural groups because they serve specific societal functions and foster a sense of community. By having a genuine relationship or common goal, these groups are more likely to exhibit shared risks and obligations that align with the principles of insurance underwriting. This helps prevent adverse selection where only those anticipating needing coverage would join purely for insurance benefits.

In contrast, options that imply formation solely for purchasing insurance or restrictions based on member numbers or family ties do not capture the essence of a natural group, which must have a broader social or occupational context.