What Are the Definitions of Primary Insurance & Contributory Insurance?

Primary insurance is an insurance plan that provides coverage up to the policy limit, after deductibles, regardless of whether you have another policy covering the same risk. Contributory insurance is an employer-provided plan to which employees contribute towards the premium.

Function

• Both primary and contributory insurance are all about risk sharing; thousands of individuals contribute to a pool of funds in the form of monthly premiums. When you suffer a covered loss or injury, you are paid from the pool of funds.

Primary Insurance

• Primary insurance relates mostly to health, life, disability and property-casualty insurance. It is the protection you acquire from a primary insurer that gives them the legal responsibility to issue payment up to policy limits for all covered risks, in contrast to excess or secondary insurance, which kicks in once primary insurance has been depleted.

Contributory Insurance

• Contributory insurance is typically used as group insurance coverage for employees for life, disability and health insurance plans. A contributory insurance plan requires you to pay a portion of the monthly premium, while the employer pays the remainder.