Life License Qualification Program (LLQP) Practice Exam

If a corporation's employees share the premium costs, what type of insurance plan do they have?

1. Noneligible

2. Noncontributory

3. Eligible

4. Contributory

The correct answer is: Contributory

When employees share the premium costs of an insurance plan, it is classified as a contributory plan. In a contributory insurance plan, both the employer and the employees contribute to the premium payments. This shared cost structure often leads to higher employee engagement in the plan since they have a financial stake in it. It also allows the employer to provide a more comprehensive benefits package while controlling costs. In contrast, noncontributory plans are fully funded by the employer, meaning employees do not financially contribute to the premiums. Eligible and noneligible designations typically refer to the criteria or conditions under which a plan qualifies for certain benefits or tax treatment, rather than the method of premium payment. The key factor that identifies the plan as contributory is the fact that employees participate in paying for their coverage.