Under a contributory group life insurance plan, which statement is correct?

Why A is correct

In a contributory group life plan, both the employer and the covered employees contribute to the premiums; the employees' share is typically deducted from their pay. Contributory plans generally require that a substantial percentage, commonly at least 75 percent, of eligible employees participate to avoid adverse selection. In a noncontributory plan, by contrast, the employer pays 100 percent of the premium and all eligible employees must be covered. The distinction between contributory and noncontributory affects participation requirements and enrollment rules.

Why the other options are wrong

• The employer paying the entire premium describes a noncontributory plan, not a contributory one in which employees also contribute. This choice does not fit the arrangement described in the question, so it is clearly not the right option to choose.
• Group plans cover employees under a master policy with certificates; each employee does not receive a separate individual policy. Accordingly, this option is not correct because it does not match the specific rule or product that is described in the question.
• Eligibility for group life is based on employment, not age; there is no age-65 participation rule for coverage. This option therefore does not match the facts presented in the question and is not the correct answer to select.

Memory hook

Contributory means employees chip in, and usually 75% must join.