West Virginia State Life Insurance Practice Exam

A noncontributory group term life plan is characterized by which of the following statements?

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

2. Employees can opt-out of the coverage

3. Premiums are shared between employer and employees

4. It is only available to full-time employees

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

A noncontributory group term life plan is defined primarily by the fact that the employer assumes full financial responsibility for the cost of the insurance coverage. In this type of plan, employees do not contribute to the premium costs, which distinguishes it from contributory plans where both the employer and employees share the premium expenses. Since employees do not pay into the plan, they typically have no option to opt-out or choose coverage levels, which aligns with the nature of noncontributory plans where coverage is automatic for eligible employees. Additionally, while noncontributory plans can be designed to include specific eligibility criteria, such as employment status, the key characteristic remains that the employer bears the total cost. This understanding of noncontributory plans highlights the employer's commitment to providing a valuable benefit without requiring financial participation from employees, thus ensuring that all qualifying employees are covered.