Primerica Life Producer Practice Test

In group life insurance, what is true about member participation in noncontributory plans?

1. Participation can be optional

2. 100% participation of members is required

3. 50% participation is acceptable

4. Participation is encouraged but not required

The correct answer is: 100% participation of members is required

In noncontributory group life insurance plans, the key characteristic is that the premiums are paid entirely by the employer, and all eligible members are automatically enrolled in the plan. This structure typically requires 100% participation from members to ensure that the risk is evenly distributed among all participants. The rationale behind this requirement is to avoid adverse selection where only those who anticipate needing insurance choose to participate. By mandating full participation, the insurer can offer more competitive rates and ensure that the risk pool is as broad and balanced as possible. Therefore, the notion that 100% participation is essential under noncontributory plans is fundamental to their design and functioning.