Tennessee Insurance Practice Exam

A noncontributory group term life plan is characterized by what feature?

1. Premiums are paid by employees

2. Entire cost of the plan is paid for by the employer

3. Costs are shared between the employer and employees

4. Plan requires evidence of insurability

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

In a noncontributory group term life insurance plan, the defining characteristic is that the entire cost of the insurance coverage is borne solely by the employer. This means employees do not contribute any premiums; rather, the employer fully provides and pays for the insurance benefits for the employees. This arrangement is advantageous for employers seeking to provide benefits without putting any financial burden on their employees. In contrast, contributory plans require employees to pay some or all of the premiums, while plans that share costs would involve both the employer and employees making contributions. Additionally, requiring evidence of insurability pertains to underwriting considerations and does not align with the noncontributory nature, as such plans typically do not require employees to provide individual health information to qualify for coverage. Thus, the correct answer highlights the employer's exclusive financial responsibility in funding the life insurance benefits.