Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In a noncontributory group life insurance plan, which statement is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
In a noncontributory plan, the employer pays 100 percent of the premium, and because employees contribute nothing, all eligible employees are automatically covered. This eliminates adverse selection, since no employee can choose to join or decline coverage based on his or her own health. In a contributory plan, by contrast, employees pay part of the premium, which is why such plans typically require a minimum participation rate among eligible employees to keep the risk pool balanced.
Why the other options are wrong
- A) Employees paying the full premium describes a voluntary arrangement, not a noncontributory plan, in which the employer would be paying entirely.
- B) Group life plans are generally issued without individual medical exams; eligibility is based on employment status, not on insurability.
- C) Splitting the premium between the employer and employees means the plan is contributory, not noncontributory.
Memory hook
Noncontributory = employer pays all, everyone plays. No opt-outs, no adverse selection.