Unit 12 Quiz
Which of the following falls under the definition of a limited policy? A) Long-term care insurance B) Accidental death and dismemberment (AD&D) insurance C) A flat-benefit disability policy D) A prescription drug plan
A prescription drug plan Explanation Prescription drug policies may be sold as supplements to individual policies or as stand-alone limited plans. LTC insurance covers a broad range of expenses involving long-term care. AD&D insurance generally also covers numerous perils related to accidental injury. A flat-benefit DI plan pays a fixed benefit for disabling accidents and injuries.
Carson is a driller on an oil rig. While coverage through his group plan is adequate, he wants an inexpensive way to continue at least some of his income and possibly pick up some of the expenses his group plan may not cover in the event he is injured. Which of the following policies would best meet his objectives? A) Accident-only insurance B) Disability income insurance C) Accidental death and dismemberment coverage D) Long-term care insurance
Accident-only insurance Explanation The most cost-effective way for Carson to obtain the coverage he is looking for is through accident-only insurance, a limited policy that indemnifies only for injuries resulting from accidental causes. Under these types of policies, benefits may be paid for any combination of the following: death, disability, dismemberment, and hospital and medical expenses.
What kind of policy provides coverage only for death, dismemberment, disability, or hospital and medical care caused by accidents? A) Specialized death policy B) Medicare supplement policy C) Accident-only policy D) Major medical type II policy
Accident-only policy Explanation Accident-only coverage provides for death, dismemberment, disability, or hospital and medical care when the insured suffers injuries caused by accident.
Which of the following statements regarding individual and group health plans is NOT correct? A) In a group plan, there is no individual underwriting. B) In an individual policy, coverage is renewable at the option of the insured or insurer. C) An individual plan issues a policy. D) All accidents are covered in a group plan.
All accidents are covered in a group plan. Explanation Only off-the-job accidents are covered under a group plan. Accidents that occur in the course of employment are covered by workers' compensation.
All of the following are examples of government insurance EXCEPT A) Social Security disability B) Blue Cross and Blue Shield coverage C) Medicare D) Medicaid
Blue Cross and Blue Shield coverage Explanation Social insurance is provided by the federal and state governments and includes Social Security (death, old-age, and disability benefits), Medicare, Medicaid, and workers' compensation. Blue Cross and Blue Shield are examples of service insurers.
What is credit disability insurance? A) Disability insurance on a debtor B) Life insurance on the life of a creditor C) Disability insurance that is paid for with a credit card D) Homeowners insurance for a mortgagee
Disability insurance on a debtor Explanation Credit life insurance and disability insurance are policies that cover debtors of a creditor in connection with a specific loan or other credit transaction. Credit life insurance covers the life of a debtor. Credit disability insurance provides indemnity for loan payments that become due while the debtor is disabled.
Hearing aids might be covered under what type of health policy? A) Hospital indemnity B) Hearing insurance C) Short-term medical expense D) Prescription drug
Hearing insurance Explanation Hearing policies cover some hearing exams and hearing aids that are not covered under comprehensive health insurance.
Which of the following is the most valid reason for a person to purchase a specified (dread) disease health insurance policy? A) She wants to make sure that she and her family are protected against a major illness. B) Her family has a history of cancer, and she is concerned that she might contract the disease. C) She wants coverage against the risk of illnesses such as AIDS, tuberculosis, and diabetes. D) She has been diagnosed with heart disease.
Her family has a history of cancer, and she is concerned that she might contract the disease. Explanation Dread disease policies provide benefits only if the insured contracts the specific disease listed in the policy. It does not provide comprehensive coverage, nor does it cover multiple diseases. A person cannot obtain coverage if she has already been diagnosed with the disease.
Which of the following statements is CORRECT? A) Medical expense insurance provides periodic payments to the insured when he is unable to work due to sickness or an injury. B) Hospital and medical expense coverage helps pay doctor and hospital bills. C) Long-term care insurance provides benefits to the insured for hospital care immediately following a surgical procedure. D) Disability income insurance reimburses the insured for medical care, hospital care, and related services for disabled insureds.
Hospital and medical expense coverage helps pay doctor and hospital bills. Explanation Disability income insurance pays a periodic benefit to the insured as a supplement to his salary when he is disabled and unable to work because of sickness or an accident. Medical expense insurance reimburses the insured for actual expenses incurred for medical and hospital care and related services. Long-term care insurance provides benefits to cover care for an extended period of time, usually in a nursing home, in an adult care center, or at home.
Which of the following policies pays a fixed hospital benefit directly to the insured, regardless of the actual hospital expenses incurred? A) Supplementary major medical B) Hospital indemnity C) Basic hospital D) Industrial health
Hospital indemnity Explanation A hospital indemnity policy pays benefits directly to the insured. These benefits are provided on a daily, weekly, or monthly basis for a specified amount, and they are based on the number of days the insured is hospitalized.
Kurt's medical expense policy states that it will pay him a flat $50 a day for each day he is hospitalized. The policy pays benefits on which basis? A) Reimbursement B) Indemnity C) Partial D) Service
Indemnity Explanation Indemnity medical expense policies do not pay expenses or bills. They merely provide the insured with a stated benefit amount for each day he is confined to a hospital as an inpatient. The money may be used by the insured for any purpose.
Marco's medical expense policy states that it will pay a flat $75 per day for room and board for each day of hospitalization. The policy pays benefits on which basis? A) Invoice B) Reimbursement C) Service D) Indemnity
Indemnity Explanation Medical expense policies written on an indemnity basis pay a daily benefit for each day of hospitalization, regardless of the actual expenses.
Which of the following statements concerning credit accident and health insurance is CORRECT? A) It covers health care costs of unemployed individuals. B) It can only be purchased from surplus lines agents. C) It can be purchased by a debtor to cover payments due on a specific loan while the debtor is disabled. D) It is purchased by a creditor to protect against loss resulting from the creditor's disability.
It can be purchased by a debtor to cover payments due on a specific loan while the debtor is disabled. Explanation Credit accident and health insurance coverage covers a debtor, with the creditor receiving the benefits to pay off the debt if the debtor becomes disabled. It can be sold as an individual policy covering a single debtor or on a group basis to cover more than 1 debtor. Credit accident and health insurance coverage ensures that the borrower (debtor) will cover payments due on a specific loan or other credit transaction while the borrower is disabled.
Which of the following statements regarding blanket health insurance is CORRECT? A) Benefits change as the group changes. B) It covers a group of people who may be exposed to the same risks. C) It provides insurance for members of associations. D) Persons insured are named in the policy.
It covers a group of people who may be exposed to the same risks. Explanation Blanket health insurance covers a changing group of people who are classified as members of the group; they are not named individually. For example, a bus company may take out a blanket policy to cover its passengers. The benefits do not change as members of the group change.
Debbie is concerned that her health insurance coverage is inadequate. Which of the following is the best reason for her to purchase an indemnity-type medical expense policy? A) It will pay the difference between what her other insurance covers and her actual expenses. B) It will pay all or part of her deductible. C) It will pay a specified per-day benefit. D) It will pay a percentage of her coinsurance.
It will pay a specified per-day benefit. Explanation Indemnity-type medical expense policies pay a flat, per-day benefit for each day the insured is hospitalized. This will help Debbie meet the expenses of her confinement that are not covered.
Agnes purchases a round-trip travel accident policy at the airport before leaving on a business trip. Her policy would be which type of insurance? A) Limited risk B) Credit accident and health C) Industrial health D) Business overhead expense
Limited risk Explanation Limited risk policies are a type of AD&D coverage that provide protection against accidental death or dismemberment only in the event of certain specified accidents, such as a death or an injury resulting from an aviation accident during a specified trip.
Agnes purchases a round-trip travel accident policy at the airport before leaving on a business trip. Her policy would be which type of insurance? A) Industrial health B) Credit accident and health C) Business overhead expense D) Limited risk
Limited risk Explanation Limited risk policies provide coverage for specific kinds of accidents or illnesses. A traveler who purchases an accident policy at an airport would be covered in the event of an accident during that specific trip. The risk covered is limited to the trip.
Which of the following is NOT a basic form of health insurance coverage? A) Disability income B) Accident-only C) Limited-pay health D) Medical expense
Limited-pay health Explanation Three distinct categories of basic health coverage exist: medical expense, disability income, and accident-only.
Which of the following statements regarding blanket health insurance is CORRECT? A) Blanket health insurance benefits for a volunteer fire department require individual applications and underwriting. B) New members of a group do not need to fill out an application. C) It usually provides benefits for both accidents and sickness. D) Coverage is for all events occurring within a specific or limited period.
New members of a group do not need to fill out an application. Explanation In blanket health insurance policies, coverage is usually for accidents only and includes coverage of volunteer groups, such as a volunteer fire department. No application is required to add new members when they become eligible.
Which of the following is NOT a common health insurance exclusion? A) Cosmetic surgery to reduce wrinkles B) Plastic surgery to repair scar tissue C) Treatment for burns sustained while the insured was committing arson D) Medical care after the insured breaks her arm while at work
Plastic surgery to repair scar tissue Explanation Elective cosmetic surgery, injuries covered by workers' compensation, and injuries sustained in the process of committing a felony are all excluded in health insurance.
All of the following types of health insurance coverage can be written on an individual basis EXCEPT A) disability income B) medical expense C) accidental death and dismemberment D) Social Security
Social Security Explanation Disability income, medical expense, and AD&D insurance can all be written on an individual basis. Social Security is a federally administered program that provides retirement, death, and disability benefits for qualified workers.
Which of the following entities would NOT be offered a blanket health insurance policy? A) A soccer team B) An airline C) The employees of a factory D) A college
The employees of a factory Explanation Blanket health policies can be used by common carriers (such as airlines, bus lines, and railroads), colleges, schools, sports teams, and camps, among others.
In which of the following situations would an accidental death and dismemberment (AD&D) policy most likely NOT pay a benefit? A) The insured injures a finger while using a chainsaw in his workshop. B) The insured trips over a computer cable at the office, strikes his head on a steam radiator, and dies from his injury 1 week later. C) While serving as a camp counselor during a class field trip, the insured loses an arm in a boating accident. D) The insured becomes distracted while talking on her cell phone when driving, collides with a telephone pole, and loses a leg as a result.
The insured injures a finger while using a chainsaw in his workshop. Explanation AD&D policies would not pay a benefit for the injury of a single finger. However, some policies may pay a reduced benefit for the loss of 1 limb.
Which of the following situations involves a loss that would typically NOT be excluded under a health insurance policy? A) The insured is injured in combat while serving in the military. B) The insured is injured with a self-inflicted injury. C) The insured is injured while vacationing in a state that is not her state of residence. D) The insured intentionally injures himself while committing a felony.
The insured is injured while vacationing in a state that is not her state of residence. Explanation Most health insurance policies typically exclude losses due to war and acts of war, self-inflicted injuries, military service, and overseas residence. Being injured while vacationing in a state other than one's state of residence is not something that would be excluded.
Which of the following statements about blanket accident and sickness insurance policies is NOT correct? A) The insurer does not need to furnish each person with a certificate. B) They can be issued on a group basis or an individual basis. C) They are issued to groups such as common carriers and educational institutions. D) Individual applications are not required.
They can be issued on a group basis or an individual basis. Explanation Blanket accident and sickness insurance includes policies issued to special groups such as common carriers and educational institutions. The policies are not issued on an individual basis. Covered individuals do not have to complete applications and do not receive certificates of insurance.
Which of the following is the best reason to purchase a vision care policy? A) To help pay the cost of medically necessary eye surgery B) To obtain coverage that will pay for corrective surgery C) To supplement existing major medical coverage D) To obtain coverage that will pay 100% of routine vision care
To supplement existing major medical coverage Explanation Vision care coverage is generally not included in major medical policies. While it pays for routine vision care, it does not pay for surgery. It pays either a scheduled benefit amount or a percentage of reasonable and customary charges; it generally does not cover 100% of costs.
Exclusions for pre-existing conditions help to avoid A) claims for long hospital confinements B) adverse selection against an insurer C) insuring persons who are accident prone D) more complicated underwriting procedures
adverse selection against an insurer Explanation Exclusions for pre-existing conditions help to avoid adverse selection against an insurer by preventing individuals with an existing illness from receiving benefits attributable to that illness. Please note that under the Affordable Care Act, insurance companies are not allowed to exclude for a pre-existing condition. Other forms of insurance, such as long-term care, disability income, and Medicare supplement, do allow exclusion for a pre-existing condition subject to the state law or statute pertaining to an insurer that seeks to limit its exposure to adverse selection.
All of the following statements regarding a hospital indemnity plan are correct EXCEPT A) another name for the plan is a hospital expense plan B) the plan pays a flat dollar amount as a daily benefit each day the insured is hospitalized C) payment is made directly to the insured, not the insurer D) the benefits from the policy may be used toward deductibles and coinsurance payments
another name for the plan is a hospital expense plan Explanation The other name for a hospital indemnity plan is a hospital income plan. The benefit may be used any way the insured sees fit; however, it is not designed to reimburse the insured for the expenses of being in the hospital.
Don just bought a new car. On the way home from the dealer, he had an accident and was disabled. Under the credit disability plan that he purchased at the time he picked up the car, the insurer will pay A) a lump sum to pay off the car loan B) benefits directly to the lender to cover Don's car payments while he is disabled C) benefits to Don to meet his living expenses D) benefits to cover Don's medical expenses
benefits directly to the lender to cover Don's car payments while he is disabled Explanation With credit disability insurance, the benefit is paid only to cover the debtor's payments on the loan until either the debt is paid off or the insured is no longer disabled.
Health and accident insurance that covers special groups of persons who are not required to be named or fill out an application is called A) group insurance B) blanket insurance C) franchise insurance D) limited insurance
blanket insurance Explanation Blanket insurance covers groups of people engaged in similar activities, such as students while on school campuses, members of a soccer team, or members of a health club. Underwriting is based on the nature of the group rather than on the individual.
Common exclusions in health insurance include all of the following EXCEPT A) cosmetic surgery to repair a cleft palate B) workers' compensation C) elective cosmetic surgery D) intentionally self-inflicted injuries
cosmetic surgery to repair a cleft palate Explanation Common exclusions include intentional injuries, war or acts of war, elective cosmetic surgery, workers' compensation, and commission of or attempted felony.
Dread disease policies generally cover diseases that A) do not occur frequently, and do not involve significant costs when they do occur B) do not occur frequently, but involve significant costs when they do occur C) occur frequently, and involve significant costs when they occur D) occur frequently, but do not involve significant costs when they occur
do not occur frequently, but involve significant costs when they do occur Explanation Dread disease policies are generally designed to cover diseases that do not occur frequently, but involve significant costs when they do occur.
Blanket health insurance is a type of A) individual health and life insurance B) group health and life insurance C) individual accident insurance D) group accident insurance
group accident insurance Explanation Blanket health insurance is a form of group accident insurance that covers accidents only under very specific conditions. Generally, these insurance policies are limited to cover passengers on a common carrier such as an airplane or train, employees at a social function such as a company picnic, members of a school's athletic team, summer camp attendees, and volunteer firefighters while on duty.
Lisa's private dental expense plan might deny a portion of her claim for all the following reasons EXCEPT A) her teeth were injured in an occupational accident B) the claim was for replacement of lost dentures C) she did not comply with the predetermination of benefits provision in her policy D) her care was diagnostic
her care was diagnostic Explanation Under many dental expense plans, diagnostic care is covered. A portion of claims may be denied, however, if Lisa does not follow the predetermination (prior authorization) requirements. Also, most policies exclude costs for replacement of lost dentures.
Vision coverage includes all of the following coverages EXCEPT A) the cost of lenses and frames B) eye examinations C) contact lenses D) loss of sight caused by disease
loss of sight caused by disease Explanation Vision policies do not cover injury to or disease of the eyes. Vision coverage is intended to help defray the costs of eye exams, corrective lenses, frames, contacts, and other corrective items.
When compared to the premiums for major medical expense coverage policies, the premiums for dread disease policies are typically A) lower B) identical C) higher D) about the same
lower Explanation Since dread disease policies only cover the specific disease stated in the policy, the coverage provided by these types of policies is very limited. As a result, the premiums for dread disease policies are often fairly inexpensive compared to those of major medical expense coverage policies.
An accident-only policy would pay for A) expenses related to cancer B) expenses related to HIV C) necessary medical care for dismemberment due to a motorcycle accident D) hospitalization due to a heart attack
necessary medical care for dismemberment due to a motorcycle accident Explanation Accident-only policies specifically exclude disease and sickness while paying for disability, death, or dismemberment due to accidental injuries.
A policy that covers one specific type of life-threatening or serious condition is known by all of the following names EXCEPT A) critical illness plan B) dread disease policy C) specified disease policy D) obscure disease policy
obscure disease policy Explanation A specified or dread disease policy or critical illness plan provides benefits explicitly for the disease or condition specifically named in the policy.
One of the major differences between individual and group health coverages is that with group coverage, A) all accidents are covered regardless of when or where they occur B) once an individual becomes eligible to enroll, no evidence of insurability is required C) each group member is given a policy D) group members have the option to renew or cancel coverage
once an individual becomes eligible to enroll, no evidence of insurability is required Explanation With group health insurance plans, group members are not generally individually underwritten if they enroll within the time frame of becoming eligible. The other statements refer to individual group health coverage.
A health insurance plan may pay benefits for all the following EXCEPT A) over-the-counter drugs B) a disabling injury or sickness C) nursing home care D) dental work
over-the-counter drugs Explanation Generally, nonprescription medicines are not covered by health insurance.
Credit health insurance A) covers creditors only B) covers both debtors and creditors C) provides payments on loans if the debtor dies D) provides payments on loans that become due while the debtor is disabled
provides payments on loans that become due while the debtor is disabled Explanation Credit health insurance and credit life insurance cover debtors of a creditor in connection with a specific loan or other credit transaction. Credit health insurance provides payments on loans that become due while the debtor is disabled, while credit life insurance covers the life of a debtor.
The purpose of medical expense insurance is to A) pay for the recuperative or nursing care needed after a long illness B) reimburse the insured for expenses incurred for medical care, hospital care, and related services C) provide periodic payments to an insured who is disabled and unable to work D) pay for the medical costs of injuries or disabilities contracted in the course of a worker's employment
reimburse the insured for expenses incurred for medical care, hospital care, and related services Explanation Medical expense insurance reimburses insureds for expenses incurred for medical and hospital care and related services. In contrast, the purpose of disability income insurance is to provide periodic payments to an insured who cannot work because of a disability. Long-term care insurance pays for rehabilitative or recuperative care needed after a long illness. Workers' compensation insurance pays for care related to an injury, disability, or illness incurred on the job.
All the following are types of limited benefit policies EXCEPT A) umbrella B) accident-only C) vision D) credit disability
umbrella Explanation Umbrella policies provide liability coverage. Limited benefit policies include accident, dread disease, critical illness, hospital indemnity, credit disability, blanket coverage, prescription drugs, vision, hearing, and short-term medical expense.
All of the following are classified as types of accident and sickness insurance coverage EXCEPT A) medical expense insurance B) survivorship insurance C) disability income insurance D) dental insurance
survivorship insurance Explanation Disability income, medical expense, and dental insurance represent major categories of accident and sickness insurance. Within these categories is a wide range of coverages. Survivorship life insurance is also known as second to die insurance. This specialized policy insures two people and pays the death benefit when the last insured dies.
All of the following statements regarding individual health coverage plans are true EXCEPT A) accidents are covered regardless of when or where they occur B) health coverage benefits may be tailored to meet the individual's specific needs C) an individual's health might prompt the need for a medical exam D) the insurance company provides every insured with a certificate of insurance as evidence of coverage
the insurance company provides every insured with a certificate of insurance as evidence of coverage Explanation When an individual enrolls in a health care plan, the insurance carrier will provide that person with a policy providing detailed information regarding the various coverages. Certificates of insurance are used with group health policies, not individual policies.
A hospital indemnity insurance policy may be recommended to a client for all the following reasons EXCEPT A) the premiums are affordable B) the policy will pay the full amount of a hospital stay C) the policy can be an ideal supplement to other health insurance D) benefits are paid directly to the insured and may be used for any purpose
the policy will pay the full amount of a hospital stay Explanation Benefits with a hospital indemnity policy are a fixed dollar-amount benefit, payable by the day for the time the insured is in the hospital. The benefit is based on actual expenses. As a rule, premiums are lower than those for other insurance, the benefits are paid directly to the insured, and the benefits need not be applied to medical expenses. These policies are often used to supplement other insurance, especially policies with high deductibles and coinsurance.
Limited plans are characterized by all of the following EXCEPT A) very broad or open perils B) limited perils C) limited benefits D) notice to the insured
very broad or open perils Explanation Limited plans are characterized by limited perils, limited benefits, and notice to the insured of the limited nature of the coverage.
Benefits paid for customary charges incurred during an examination by an ophthalmologist or optometrist are included in A) vision care insurance B) basic physician's expense insurance C) disability income insurance D) surgical expense insurance
vision care insurance Explanation Vision care coverage, normally found in a group health insurance policy, usually pays for reasonable and customary charges incurred during eye examinations by ophthalmologists and optometrists.