South Carolina Life Insurance Practice Exam

Which of the following is incorrect regarding a noncontributory group plan?

1. Employers pay the entire cost of coverage

2. It covers all eligible employees automatically

3. Employees receive individual policies

4. Enrollment is typically automatic

The correct answer is: Employees receive individual policies

In a noncontributory group plan, the employer assumes full responsibility for the cost of the coverage, meaning the employees do not have to contribute financially to their premiums. This model is designed to ensure that all eligible employees are covered, which is why enrollment is typically automatic. The characteristic that stands out as incorrect is the notion that employees receive individual policies. In a noncontributory group plan, coverage is provided as a single group policy rather than individual policies for each employee. This collective approach facilitates easier administration and often results in lower premiums due to the risk being spread across a larger group. Consequently, while each employee has coverage, they do not possess separate individual policies; they are all considered members of the overarching group policy provided by the employer. This distinction is crucial in understanding how noncontributory group plans operate.