Question 7

Group insurance is contributory when employees pay part of the premium.

In a contributory group insurance plan, employees contribute to the cost of their insurance premiums, which distinguishes it from non-contributory plans where the employer pays the full amount. Thus, the employee's participation in paying a portion of the premium is essential for classifying the insurance as contributory.

A) Third party collects part of premium

This option does not accurately describe a contributory insurance plan. The role of a third party in collecting premiums is irrelevant to whether a plan is contributory or not, as the defining factor is the employee's contribution.

B) Employer pays all premium

If the employer pays the entire premium for the insurance, then the plan is classified as non-contributory. Therefore, this option does not meet the criteria for contributory insurance, where employee contributions are necessary.

C) Employee pays part of premium

This is the correct answer because contributory group insurance specifically requires that employees share in the payment of premiums. By contributing, employees help finance their coverage, which is the hallmark of a contributory plan.

D) Service provider collects part

Similar to option A, this choice focuses on the role of the service provider rather than the payment structure of the insurance. The collection of premiums by a service provider does not determine whether the insurance is contributory, as the key factor is the employee's financial involvement.

Conclusion

Contributory group insurance is defined by the requirement that employees pay a portion of the premiums, as seen in option C. Other options fail to meet this definition, focusing instead on aspects unrelated to employee contribution, such as third-party involvement or employer payment. Therefore, option C is the only correct choice for identifying contributory insurance.