Tennessee Life Producer Practice Exam

What is a defining feature of a noncontributory group term life plan?

1. The entire cost of the plan is shared between employer and employee

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

3. Employees must contribute to their own premiums

4. Coverage is provided based on the employee's selection of benefits

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

A defining feature of a noncontributory group term life plan is that the entire cost of the plan is paid for by the employer. This means that employees are not required to contribute any part of the premium for their life insurance coverage. Since the employer takes on the full financial responsibility for the plan, employees receive the benefit at no direct cost to themselves. This characteristic can make noncontributory plans appealing, as they provide insurance protection without requiring employees to dip into their own earnings to pay for premiums. Additionally, because employees do not contribute, participation is often higher, helping companies to ensure that a larger portion of their workforce is covered by life insurance. This type of plan is also beneficial for employers as it simplifies the administration of the benefits.