Indiana State Life and Health Insurance Practice Exam

A noncontributory group term life plan is characterized by?

1. The entire cost of the plan is paid for by the employer

2. The entire cost of the plan is paid for by the employee

3. The cost of the plan is shared by both employer and employee

4. Both employer and employee must provide evidence of insurability

The correct answer is: The entire cost of the plan is paid for by the employer

A noncontributory group term life plan is characterized by the entire cost being borne by the employer. In this type of plan, employees do not make any contributions towards the cost of their life insurance coverage; instead, the employer takes on the complete financial responsibility. This structure is designed to encourage participation among employees, as they receive coverage without having to pay for it themselves. In a noncontributory plan, since employees are not required to contribute financially, it usually leads to higher enrollment rates compared to contributory plans, where employees must opt in and pay a portion of the premium. This can be particularly advantageous for employers aiming to offer benefits that contribute to employee satisfaction and retention. Other options describe different scenarios. For instance, a plan where the entire cost is paid by the employee would be contributory, as it directly involves employee contributions. Similarly, a plan where costs are shared would also not fit the definition of a noncontributory plan, and requiring both employer and employee to provide evidence of insurability is typically associated with individual policies or situations in contributory group plans where some form of underwriting is necessary.