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The fundamental concept of insurance is that it balances costs across a large, random sample of individuals (see risk pool). For instance, an insurance company has a pool of 1000 randomly selected subscribers, each paying $100 per month. One person becomes very ill while the others stay healthy, allowing the insurance company to use the money paid by the healthy people to pay for the treatment costs of the sick person. However, when the pool is self-selecting rather than random, as is the case with individuals seeking to purchase health insurance directly, adverse selection is a greater concern. Some individuals have extremely high medical expenses, in extreme cases totaling a half million dollars or more. These represent a relatively small percentage of the insured population, however. 6 Adverse selection could leave an insurance company with primarily sick subscribers and no way to balance out the cost of their medical expenses with a large number of healthy subscribers.

Group purchase can sometimes offer you a lower rate for a given death benefit either because the employer or other group sponsor subsidizes the premium or because the rates are averages weighted by people younger than you. There are virtually no health qualifications for getting the group coverage.