LLQP Life Insurance · Component 2.1 · 30% of the exam
A group life plan is 'non-contributory'. This means:
- ANo one pays a premium, since the insurer provides the coverage in exchange for the employer's other business
- BThe insurer contributes part of the premium, so the employer and employees share a reduced cost
- CMembers pay the whole premium through payroll deduction, and enrolment is optional for each of them
- The employer pays the whole premium, and typically all eligible members must be enrolled
Correct answer: D) The employer pays the whole premium, and typically all eligible members must be enrolled
Non-contributory plans are employer-paid and usually require 100% participation, which eliminates anti-selection. Contributory plans, where members pay part, generally require a minimum participation percentage instead.
Why the other options are wrong
- APremiums are always paid; here by the employer.
- BInsurers collect premiums; they do not contribute them.
- CMember-paid describes a contributory plan.
Exam tip
Non-contributory = employer pays, everyone in. Contributory = members share cost, minimum participation required.
Common mistake
Confusing non-contributory with voluntary coverage.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.