In group insurance, what does the term "Contributory" mean?

In group insurance, the term "Contributory" refers to a situation where the premiums are shared between the policyowner and the insured individuals. This means that both the employer (as the policyowner) and the employees (the insureds) contribute to the cost of the premiums. This arrangement is typically established to make insurance more affordable for employees while still allowing the employer to have some control over costs.

In a contributory plan, employees usually are required to pay a portion of the premiums, often deducted from their paychecks. This shared responsibility can lead to a greater commitment from employees to participate in the insurance program since they have a financial stake in it. Additionally, contributory group insurance plans often have favorable tax implications for employers and can enhance recruitment and retention efforts by offering appealing benefits to prospective and current employees.

The other options describe different arrangements of premium payment: if only the employer pays, it would be a non-contributory plan; if premiums are paid entirely by the insured, that would also not fall under the contributory definition; and stating there is no payment required contradicts the concept of contributions altogether.