In a noncontributory group life insurance plan, the employer pays the entire premium. Which participation rule applies?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
In a noncontributory plan the employer pays the full cost, and because the employer bears all the expense, all eligible employees must be covered — typically 100% participation. This maximizes risk spreading and prevents adverse selection. In a contributory plan, where employees pay part of the cost, insurers commonly require that at least 75% of eligible employees participate to keep the risk pool healthy. The 50% figure, optional election, and executive-only design are incorrect; the defining rule of noncontributory coverage is universal inclusion of eligible employees.
Why the other options are wrong
- B) Optional election is a feature of contributory plans, where employees pay part of the cost. In a noncontributory plan all eligible employees must be covered.
- C) The typical participation minimum for contributory plans is 75%. A noncontributory plan, where the employer pays all, requires 100% participation of eligible employees.
- D) Eligibility is defined by the plan's employee classes, which may include executives among others, but coverage is not restricted to executives alone.
Memory hook
When the boss pays all, everybody plays — noncontributory means 100% of the eligible crew.