Rhode Island Life Insurance Practice Exam

If employees share in the cost of insurance, what type of group life insurance plan is being utilized?

1. Non-contributory

2. Individually-owned

3. Contributory

4. Supplemental

The correct answer is: Contributory

When employees share in the cost of insurance, a contributory group life insurance plan is being utilized. In this type of plan, both the employer and employees contribute to the payment of premiums, meaning that employees are required to participate in sharing the cost. This often results in lower premiums for individual employees because the risk is spread across a larger group. Contributory plans typically require a minimum percentage of eligible employees to enroll in order for the coverage to be effective. This structure encourages participation by making the cost more manageable for employees and providing them with access to insurance they might not purchase on their own due to higher individual rates. In contrast, non-contributory plans are fully funded by the employer, where employees do not contribute to the cost of premiums. Individually-owned policies refer to insurance purchased by a single individual on their own, not through a group. Supplemental coverage usually refers to additional insurance that provides extra benefits beyond a basic plan, rather than describing how the cost is shared among members of a group. Therefore, the key characteristic of contributory plans—cost-sharing between employees and the employer—makes this the correct answer.