55 Health Insurance Practice Questions & Answers

1. 1. A basic hospital expense policy differs from a major medical policy primarily because the basic policy:

   • A.Covers only expenses incurred outside of a hospital
   • B.Requires the insured to satisfy a calendar-year deductible before any benefit is payable
   • C.Provides first-dollar coverage with no deductible, but limits benefits to a scheduled daily room-and-board amount plus a miscellaneous expense limit✓ Answer
   • D.Pays a stated percentage of all covered expenses with no dollar limits

   Basic hospital, medical and surgical policies are written on a first-dollar basis: there is no deductible, but the trade-off is low, scheduled benefit limits (a daily room-and-board maximum plus a miscellaneous expense maximum, often a multiple of the room rate). Deductibles, coinsurance and large maximums are the defining mechanics of major medical, not of basic plans.

   Source: Pearson VUE Health/A&H General Knowledge content outline §I.C.1–2 (basic hospital, medical and surgical policies vs. major medical policies)Report a problem with this question

2. 2. An insured owns a basic hospital/surgical expense plan and a supplemental (superimposed) major medical policy. How do the two coverages interact on a large claim?

   • A.The supplemental major medical pays first, and the basic plan then pays whatever remains
   • B.The basic plan is suspended for as long as the supplemental major medical is in force
   • C.The basic plan pays first up to its limits; the supplemental major medical then covers remaining eligible expenses, usually after the insured satisfies a corridor deductible✓ Answer
   • D.Both plans pay their benefits in full, so the insured may collect more than the expense actually incurred

   A supplemental (superimposed) major medical policy is layered on top of a basic plan: the basic plan's scheduled benefits are exhausted first, and the major medical then picks up remaining eligible expenses, typically after a corridor deductible bridging the two. Because both are expense-incurred contracts, the insured cannot be reimbursed more than the expense actually incurred.

   Source: Pearson VUE Health General Knowledge outline §I.C.2 (major medical policies); standard supplemental/superimposed major medical layering with corridor deductibleReport a problem with this question

3. 3. A restoration of benefits provision in a major medical plan:

   • A.Refunds premium to the insured in any year in which no claim is filed
   • B.Restores benefit amounts already paid back toward the policy's maximum, so the insured's remaining maximum benefit is not permanently reduced✓ Answer
   • C.Reinstates a policy that has lapsed for nonpayment of premium
   • D.Waives the deductible after the insured's first claim of the year

   Every dollar a major medical plan pays reduces the remaining maximum benefit. A restoration provision credits used benefits back toward that maximum (automatically in small annual increments, or on evidence of insurability), so a single large claim does not permanently exhaust the insured's coverage. Reinstatement, by contrast, deals with a lapsed policy and is an entirely different provision.

   Source: Pearson VUE Health General Knowledge outline §I.C.2 / §II (maximum benefit limits); standard major medical restoration-of-benefits provisionReport a problem with this question

4. 4. A comprehensive major medical plan has a $1,000 calendar-year deductible, 80/20 coinsurance and a $3,000 annual out-of-pocket maximum. The insured incurs $10,000 of covered in-network expenses. How much of that amount does the insured pay?

   • A.$2,000
   • B.$2,800✓ Answer
   • C.$3,000
   • D.$1,800

   Cost sharing is applied in a fixed order: the insured pays the $1,000 deductible first, then the 20% coinsurance share of the remaining $9,000, which is $1,800. Total insured cost is $2,800, which is below the $3,000 stop-loss, so the out-of-pocket maximum is never triggered and the plan pays the other $7,200.

   Source: Pearson VUE Health General Knowledge outline §II.A (deductibles, coinsurance, out-of-pocket/stop-loss limits) — order of application: deductible, then coinsurance, then stop-lossReport a problem with this question

5. 5. A surgeon bills $2,000 for a covered procedure. The plan's usual, customary and reasonable (URC) allowance for that procedure is $1,500. The insured has already satisfied the deductible and the plan pays 80% coinsurance. How much does the insured owe?

   • A.$800✓ Answer
   • B.$400
   • C.$700
   • D.$500

   An expense-incurred plan pays a percentage of the URC allowance, not of the billed charge: 80% of $1,500 = $1,200. The insured owes the 20% coinsurance on the allowance ($300) plus the entire $500 that exceeds URC, for $800. Charges above URC are not covered expenses, so they are not credited toward the deductible or the out-of-pocket maximum either.

   Source: Pearson VUE Health General Knowledge outline §II.A (usual, reasonable and customary charges; eligible expenses; coinsurance)Report a problem with this question

6. 6. Which statement correctly distinguishes a copayment from coinsurance?

   • A.A copayment is a flat dollar amount the member pays per service, while coinsurance is a percentage of covered charges✓ Answer
   • B.A copayment applies only after the out-of-pocket maximum has been reached
   • C.A copayment is a percentage of covered charges, while coinsurance is a flat dollar amount per service
   • D.Both are percentages of covered charges and differ only in when they are billed

   A copayment is a fixed dollar charge collected at the point of service and is typical of managed care (HMO) plans, while coinsurance is the insured's stated percentage of covered charges above the deductible and is typical of major medical and PPO designs. Confusing the two is one of the most frequently missed distinctions on the health exam.

   Source: Pearson VUE Health General Knowledge outline §II.A (copayments; coinsurance)Report a problem with this question

7. 7. Which statement is TRUE of a health plan's annual out-of-pocket maximum (stop-loss limit)?

   • A.It is the maximum amount the insurer will pay during a benefit year
   • B.Amounts applied to the deductible never count toward it
   • C.Premiums paid for the coverage count toward it
   • D.Once it is reached, the plan pays 100% of remaining covered in-network expenses for the rest of the benefit year✓ Answer

   The stop-loss limit caps what the INSURED pays, not what the insurer pays: deductible, coinsurance and copayments accumulate toward it, and once it is satisfied the plan pays 100% of further covered in-network expenses for the remainder of the year. Premiums are the price of the coverage rather than cost sharing on a claim, so they never count toward the out-of-pocket maximum.

   Source: Pearson VUE Health General Knowledge outline §II.A (deductibles, coinsurance, maximum benefit/stop-loss); ACA annual limitation on cost sharing, 45 CFR 156.130 (premiums excluded from cost sharing)Report a problem with this question

8. 8. A corridor deductible is best described as:

   • A.A deductible that may be carried over and applied against the following year's deductible
   • B.A deductible that applies separately to each covered family member
   • C.The portion of a provider's charge that exceeds the URC allowance
   • D.The deductible amount the insured must pay between the point where the basic plan's benefits are exhausted and the point where supplemental major medical benefits begin✓ Answer

   The corridor deductible exists only in a layered basic-plus-supplemental-major-medical arrangement: it is the gap the insured must bridge out of pocket after the basic plan's scheduled benefits run out and before the major medical layer starts paying. Option D describes a carryover provision and option B describes the URC excess, which are separate concepts.

   Source: Pearson VUE Health General Knowledge outline §II.A (deductibles); supplemental major medical corridor deductibleReport a problem with this question

9. 9. Three members of one family are injured in the same automobile accident. Under a common accident (family) deductible provision, how is the deductible applied to the resulting covered expenses?

   • A.A separate deductible applies for each provider who bills for the injuries
   • B.Only one deductible applies to all family members injured in that single accident✓ Answer
   • C.A separate full deductible applies to each injured family member
   • D.No deductible applies at all because the injuries were accidental

   The common accident provision prevents a single event from generating multiple deductibles: when two or more insured family members are injured in the same accident, the plan applies only one deductible to the combined expenses. It is a family-friendly variation on the deductible, not a waiver of the deductible.

   Source: Pearson VUE Health General Knowledge outline §II.A (deductibles) — common accident/family deductible variationReport a problem with this question

10. 10. In a traditional health maintenance organization (HMO), a member who wants to see a specialist must generally first:

    • A.Obtain a referral from the primary care physician, who acts as gatekeeper✓ Answer
    • B.Select any specialist, inside or outside the service area, with no referral
    • C.Pay the specialist directly and then file a claim for reimbursement
    • D.Satisfy a calendar-year deductible before the specialist visit is covered

    The HMO controls utilization by routing all care through a primary care physician who must authorize specialty care before the plan will cover it; without that gatekeeper referral the service is generally not a covered benefit. HMOs also use flat copayments rather than deductibles and provide care on a prepaid service basis rather than reimbursing the member.

    Source: Pearson VUE Health General Knowledge outline §I.C.3 (HMOs) and §IV (managed care) — gatekeeper/PCP referral requirementReport a problem with this question

11. 11. Under capitation, an HMO pays a participating physician:

    • A.A share of the premium collected from out-of-network members
    • B.A discounted fee for each service actually rendered
    • C.The physician's full billed charge, less the member's copayment
    • D.A fixed amount per member per month, whether or not those members receive services✓ Answer

    Capitation is a prepayment method: the HMO pays a fixed per-member-per-month amount for each enrollee assigned to the physician, so the physician's revenue does not rise with the volume of services. This shifts part of the utilization risk to the provider and creates the financial incentive toward preventive care that characterizes HMOs. Discounted fee-for-service, by contrast, is the PPO payment model.

    Source: Pearson VUE Health General Knowledge outline §I.C.3 (HMOs) / §IV (managed care) — capitated prepaymentReport a problem with this question

12. 12. An HMO that contracts with an independent practice association (IPA) is described as an 'open panel' arrangement because:

    • A.Its members may obtain covered care from any physician in the country
    • B.No referral is required for any service under this model
    • C.Its participating physicians practice from their own offices and may also treat patients who are not HMO members✓ Answer
    • D.The HMO employs the physicians and owns the facilities in which they practice

    Panel terminology describes whom the contracted physicians may treat: in an open panel (IPA model) the doctors remain independent, keep their own practices and see non-member patients as well; in a closed panel (staff or group model) they may treat only the HMO's members. Option C describes the staff model, which is closed panel.

    Source: Pearson VUE Health General Knowledge outline §I.C.3 (HMOs) — IPA/open panel vs. staff and group/closed panel modelsReport a problem with this question

13. 13. Which feature is characteristic of a preferred provider organization (PPO)?

    • A.Benefits are paid as a fixed dollar amount for each day of hospital confinement
    • B.Network providers accept negotiated discounted fee-for-service rates, and members may use out-of-network providers at higher cost sharing✓ Answer
    • C.Members have no benefits at all outside the network, even for emergency care
    • D.Providers are paid by capitation and members must go through a gatekeeper for all specialty care

    A PPO is built on discounted fee-for-service contracts: providers accept reduced negotiated rates (and agree not to balance-bill in-network members) in exchange for patient volume. There is no gatekeeper and no referral requirement, and out-of-network care is still covered, but with a higher deductible, higher coinsurance and a higher out-of-pocket maximum.

    Source: Pearson VUE Health General Knowledge outline §I.C.4 (PPOs) / §IV (managed care)Report a problem with this question

14. 14. Which arrangement uses network contracting and cost sharing much like a PPO's, but pays no benefits at all for non-emergency care obtained outside its network?

    • A.Exclusive provider organization (EPO)✓ Answer
    • B.Point-of-service (POS) plan
    • C.Traditional indemnity (fee-for-service) plan
    • D.Preferred provider organization (PPO)

    An EPO contracts with a network on a discounted fee-for-service basis like a PPO and usually does not require gatekeeper referrals, but coverage is exclusive to that network: outside it, only emergency care is payable. That makes the EPO the middle ground between the HMO's closed prepaid system and the PPO's out-of-network option.

    Source: Pearson VUE Health General Knowledge outline §I.C (medical expense plan types) / §IV (managed care) — exclusive provider organizationReport a problem with this question

15. 15. The distinguishing feature of a point-of-service (POS) plan is that:

    • A.The insurer reimburses any provider the insured chooses on a URC basis, with no network at all
    • B.The member decides each time care is needed whether to use the PCP-coordinated in-network benefit or to self-refer out of network at a reduced benefit level✓ Answer
    • C.All care is prepaid on a capitated basis and there is no out-of-network option
    • D.The employer, rather than an insurer, bears the claim risk

    A POS plan is an HMO/PPO hybrid: the member enrolls with a primary care physician and receives the richest benefits when that PCP coordinates or refers, but retains the right to go outside the network at the point of service in exchange for higher deductibles and coinsurance. The choice is made when care is sought, which is what gives the plan its name.

    Source: Pearson VUE Health General Knowledge outline §I.C.5 (Point of Service plans)Report a problem with this question

16. 16. A group medical plan requires the insured to obtain the plan's approval before any non-emergency hospital admission. The primary purpose of this precertification (prospective utilization review) requirement is to:

    • A.Satisfy the insured's calendar-year deductible in advance
    • B.Guarantee that the insurer will pay 100% of the hospital's billed charges
    • C.Confirm the medical necessity and appropriate setting of the care before the expense is incurred; failing to obtain it typically reduces the benefit otherwise payable✓ Answer
    • D.Shift the claim to the insured's secondary plan under coordination of benefits

    Precertification is a prospective cost-containment device: it screens the necessity, setting and expected length of stay before money is spent, and plans enforce it with a benefit reduction or penalty when the insured does not obtain approval. It is not a promise of payment — the claim must still be a covered expense and remains subject to the plan's deductible and coinsurance.

    Source: Pearson VUE Health General Knowledge outline §II.A (pre-authorizations and prior approval requirements) and §IV (cost containment/managed care)Report a problem with this question

17. 17. In group health insurance, the individual covered employee receives:

    • A.No written evidence of coverage of any kind
    • B.A certificate that legally replaces the master contract as the insuring agreement
    • C.The master policy, which makes the employee the policyowner
    • D.A certificate of insurance describing the coverage; the master policy is issued to and owned by the group sponsor✓ Answer

    The insurance contract in a group case is made between the insurer and the group sponsor, who holds the master policy as policyowner and exercises the ownership rights. Members receive only a certificate of coverage, which is evidence of participation and a summary of benefits — it is not the contract, so where certificate and master policy conflict, the master policy governs.

    Source: Pearson VUE Health General Knowledge outline §I.E.1–2 (differences between individual and group contracts; general characteristics) — master policy and certificate of insuranceReport a problem with this question

18. 18. When an insurer underwrites a group health plan, it:

    • A.May not consider the group's own claim experience under any circumstance
    • B.Underwrites each member individually and assigns each a separate rating
    • C.Requires satisfactory evidence of individual insurability from every eligible member at initial enrollment
    • D.Underwrites the group as a whole and generally requires that the group have been formed for a purpose other than obtaining insurance✓ Answer

    Group underwriting evaluates the characteristics of the group itself — size, industry, turnover, average age and, for larger groups, its own claim experience — rather than the health of each member. The requirement that the group exist for a purpose other than buying insurance protects against adverse selection by groups assembled solely by unhealthy individuals. Timely enrollees typically need no evidence of insurability; late enrollees may.

    Source: Pearson VUE Health General Knowledge outline §I.E.1–2 (differences between individual and group contracts; general characteristics of group insurance)Report a problem with this question

19. 19. Under a noncontributory group health plan:

    • A.The employer and the employees each pay half of the premium
    • B.Employees pay the entire premium and participation is voluntary
    • C.The employer pays the entire premium and 100% of eligible employees must be covered✓ Answer
    • D.Only those employees who submit evidence of insurability are covered

    In a noncontributory plan the employer bears the entire cost, so there is no reason for a healthy employee to decline; insurers therefore require that all eligible employees be enrolled, which eliminates adverse selection. In a contributory plan employees pay part of the premium and enrollment is voluntary, so insurers instead impose a minimum participation percentage.

    Source: Pearson VUE Health General Knowledge outline §I.E.2 (general characteristics of group insurance) — contributory vs. noncontributory participation requirementsReport a problem with this question

20. 20. A covered employee's spouse loses group health coverage because of divorce from that employee. Under federal COBRA, what is the maximum continuation period available to the former spouse as a qualified beneficiary?

    • A.29 months
    • B.36 months✓ Answer
    • C.18 months
    • D.Continuation is not available for this qualifying event

    COBRA sets the duration by qualifying event: 18 months for termination of employment or reduction of hours, and 36 months for the dependent-side events — divorce or legal separation, death of the covered employee, the employee's Medicare entitlement, and a child ceasing to be a dependent. The 29-month figure applies only to the disability extension of an 18-month period.

    Source: COBRA continuation coverage, U.S. DOL/EBSA guidance (ERISA §§601–608); Pearson VUE Health General Knowledge outline §I.E.3 (COBRA)Report a problem with this question

21. 21. Under federal COBRA, a qualified beneficiary must be given at least ______ to elect continuation coverage, and the plan may charge up to ______ of the plan's full cost of that coverage.

    • A.45 days; 125%
    • B.30 days; 100%
    • C.60 days; 102%✓ Answer
    • D.90 days; 150%

    COBRA gives the qualified beneficiary an election period of at least 60 days, and the plan may charge the full cost of the coverage — employer share plus employee share — plus a 2% administrative charge, for a maximum of 102%. (Separately, the beneficiary has at least 45 days after electing to make the first payment, and the premium may rise to 150% during the 11-month disability extension.)

    Source: COBRA continuation coverage, U.S. DOL/EBSA guidance (ERISA §§602(3), 602(2)(A)) — 60-day election period; premium capped at 102% of the plan's applicable costReport a problem with this question

22. 22. A child is covered as a dependent under both parents' group health plans. The parents are married and live together; the father's birthday is May 2 and the mother's is March 14, and the father is the older parent. Under the NAIC coordination of benefits rules, which plan is primary for the child's claims?

    • A.The mother's plan, because her birth month and day fall earlier in the calendar year✓ Answer
    • B.The father's plan, because he is the older parent
    • C.Whichever plan the parents designate in writing
    • D.The plan that has covered the child for the longer period of time

    The birthday rule looks only at the month and day of each parent's birthday, not the year of birth, so the parent whose birthday falls earlier in the calendar year has the primary plan — here, the mother's (March 14). Length of coverage is only a later tiebreaker (used when both parents share the same birthday), and a court decree in a divorce or separation would override the rule entirely.

    Source: NAIC Coordination of Benefits Model Regulation (Model #120) — order of benefit determination rules, dependent child birthday ruleReport a problem with this question

23. 23. When group health coverage terminates and a certificate holder exercises the conversion privilege, that person may:

    • A.Obtain an individual policy from the same insurer, generally by applying within 31 days of the group coverage ending and without proving insurability✓ Answer
    • B.Obtain an individual policy only after submitting satisfactory evidence of insurability
    • C.Convert only after federal continuation coverage has first been exhausted
    • D.Continue the identical group coverage indefinitely at group rates

    Conversion is a contractual right to move from group to an INDIVIDUAL policy issued by the same insurer, exercisable within a short window (customarily 31 days) and without evidence of insurability, though the individual premium is based on the person's attained age and the benefits are usually narrower. It is distinct from COBRA continuation, which keeps the same group coverage in force for a limited time.

    Source: Pearson VUE Health General Knowledge outline §I.E (group insurance — general characteristics); standard group conversion privilege (31-day conversion period, no evidence of insurability)Report a problem with this question

24. 24. Which of the following medical account arrangements may be funded ONLY by the employer?

    • A.A health reimbursement arrangement (HRA)✓ Answer
    • B.A health savings account (HSA)
    • C.A health flexible spending account (FSA)
    • D.An Archer medical savings account (MSA)

    An HRA is an employer-funded notional account: employees may not contribute to it, and it reimburses substantiated medical expenses, with any carryover of unused amounts allowed at the employer's discretion. HSAs may receive contributions from the individual, the employer or others, and health FSAs are ordinarily funded by employee salary reduction under a Section 125 cafeteria plan.

    Source: IRS Publication 969 (Health Savings Accounts and Other Tax-Favored Health Plans) — HRAs must be funded solely by the employer; Pearson VUE outline §I.C.6–8Report a problem with this question

25. 25. Which statement correctly contrasts a health savings account (HSA) with a health flexible spending account (FSA)?

    • A.The FSA is owned by the individual and is portable, while the HSA belongs to the employer and is forfeited at termination of employment
    • B.Both require the accountholder to be enrolled in a qualifying high-deductible health plan
    • C.The HSA is owned by the individual, is portable and its unused balance carries over year to year, while the FSA is employer-established, is not portable and is subject to use-it-or-lose-it✓ Answer
    • D.Neither may be funded through employee salary reduction

    An HSA is a trust or custodial account owned by the individual, so it travels with the accountholder between jobs and health plans and the balance rolls over indefinitely; only the HSA requires a qualifying HDHP with no other disqualifying coverage. A health FSA is an employer plan funded by salary reduction, is forfeited at termination and must generally be spent within the plan year (subject only to a limited grace period or carryover option).

    Source: IRS Publication 969 (HSAs are individually owned and portable; health FSAs are subject to the use-it-or-lose-it rule under Treas. Reg. §1.125); Pearson VUE outline §I.C.6–7Report a problem with this question

26. 26. An employer self-funds its group medical plan and purchases stop-loss insurance. The stop-loss coverage:

    • A.Pays covered employees' claims directly, replacing the self-funded plan
    • B.Is required by federal law of every self-funded employer plan
    • C.Limits the amount an individual employee must pay out of pocket in a year
    • D.Reimburses the employer once claims exceed a stated attachment point, on a specific (per-person) or aggregate (whole-plan) basis✓ Answer

    In a self-funded plan the employer, not an insurer, pays the claims out of its own assets; stop-loss (excess) insurance protects the employer's balance sheet by reimbursing it for claims above an attachment point — specific stop-loss for any one covered person, aggregate stop-loss for the plan's total claims. The employees' protection against catastrophic cost is the plan's own out-of-pocket maximum, not the stop-loss policy.

    Source: Pearson VUE Health General Knowledge outline §I.E / §IV (group plan funding and cost containment) — self-funded plans with specific and aggregate stop-loss coverageReport a problem with this question

27. 27. A hospital indemnity (hospital income) policy pays:

    • A.Only the portion of the hospital bill left unpaid by the insured's major medical plan
    • B.A stated dollar amount for each day the insured is confined, regardless of the actual expenses incurred✓ Answer
    • C.The actual covered charges incurred, after a deductible and coinsurance
    • D.Participating hospitals directly, on a prepaid capitated basis

    Hospital indemnity coverage is written on a valued (indemnity) basis: the benefit is a fixed per-day amount triggered by confinement, payable to the insured to use for any purpose and without regard to the actual bill. That contrasts with expense-incurred/reimbursement coverage such as major medical and with the HMO's prepaid service basis; being a limited benefit, it is not comprehensive medical expense coverage.

    Source: Pearson VUE Health General Knowledge outline §I.G.6 (hospital indemnity) — valued/indemnity basis vs. expense-incurred reimbursementReport a problem with this question

28. 28. An insured's individual disability income policy defines total disability as the inability to perform the duties of any occupation for which he is reasonably suited by education, training, or experience. A surgeon who loses fine motor control in one hand can no longer operate but could teach medical school. Under this policy, what is the most likely claim outcome?

    • A.The claim is paid only after he actually accepts a teaching position
    • B.The claim is denied because he remains able to work in another suited occupation✓ Answer
    • C.The claim is paid at 50% as a partial disability
    • D.The claim is paid in full because he cannot perform his own occupation

    The 'any occupation' definition is the strictest test of total disability: benefits are payable only if the insured cannot work in ANY occupation for which education, training, or experience fits him. Because teaching is such an occupation, no total disability exists, even though he cannot perform his own occupation. An 'own occupation' definition would have paid the claim.

    Source: Uniform A&H exam outline — Types of Policies: disability income, definitions of total disability (own occupation vs. any occupation)Report a problem with this question

29. 29. An insured with a 90-day elimination period becomes totally disabled on March 1, recovers and returns to work full time on August 1, then becomes disabled again from the SAME cause on October 1. Under the recurrent disability provision (6-month window), what happens?

    • A.The second disability is treated as a continuation of the first, so no new elimination period applies✓ Answer
    • B.A new 90-day elimination period must be satisfied before benefits resume
    • C.Benefits are denied because the insured returned to full-time work
    • D.A shortened 30-day elimination period applies to the recurrence

    The recurrent disability provision states that a relapse from the same or a related cause within the stated window (commonly 6 months) after returning to work is treated as a continuation of the prior claim. Because the October 1 relapse falls within 6 months of the August 1 return, benefits resume immediately with no second elimination period, and it draws on the same benefit period.

    Source: Uniform A&H exam outline — Other Insurance Concepts: recurrent disability provisionReport a problem with this question

30. 30. Which statement correctly distinguishes the probationary period, the elimination period, and the benefit period in an individual disability income policy?

    • A.Probationary period: time after disability begins before benefits are payable; elimination period: time after issue before sickness is covered; benefit period: how long premiums are waived
    • B.Probationary period: maximum length of a claim; elimination period: maximum length of the policy; benefit period: grace period for premiums
    • C.Probationary period: time after issue before sickness is covered; elimination period: time after disability begins before benefits are payable; benefit period: how long benefits continue✓ Answer
    • D.All three describe the same waiting time, measured from three different dates

    These three periods are measured from different events. The probationary period runs from the policy issue date until sickness coverage begins (accidents are typically covered immediately). The elimination period is a time deductible that starts when disability begins, during which no benefits accrue — lengthening it lowers the premium. The benefit period is the maximum duration benefits are paid once they begin.

    Source: Uniform A&H exam outline — Types of Policies: disability income (probationary, elimination, and benefit periods)Report a problem with this question

31. 31. An insured with a disability income policy suffers an accident resulting in the total and permanent loss of sight in both eyes, but is still physically able to do sedentary work. The policy contains a presumptive disability provision. How is the claim handled?

    • A.Benefits are paid only after the elimination period and only if he stops working
    • B.Benefits are limited to a partial disability amount because he can still work
    • C.Full total disability benefits are paid, with no elimination period and no requirement to prove loss of income✓ Answer
    • D.No benefits are paid because sight loss alone does not prevent all occupations

    A presumptive disability provision automatically deems the insured totally disabled upon specified losses — sight, hearing, speech, or any two limbs — regardless of whether he can still earn income. Because the disability is presumed as a matter of contract, the elimination period is waived and full benefits begin immediately.

    Source: Uniform A&H exam outline — Types of Policies: disability income, presumptive disabilityReport a problem with this question

32. 32. An insured returns to work part time after a total disability and earns 60% of his former income. His policy pays a benefit proportional to his actual loss of earnings. Which provision is operating?

    • A.Presumptive disability
    • B.Relation of earnings to insurance
    • C.Recurrent disability
    • D.Residual disability✓ Answer

    Residual disability pays a benefit calculated in proportion to the insured's actual percentage of lost earnings — here roughly 40% of the full benefit. It differs from partial disability, which typically pays a flat reduced amount (often 50%) for a limited time and often only after a period of total disability, and from relation of earnings to insurance, which REDUCES benefits when total coverage exceeds prior earnings.

    Source: Uniform A&H exam outline — Other Insurance Concepts: total, partial, recurrent, and residual disabilityReport a problem with this question

33. 33. A corporation buys a disability policy on its owner that reimburses rent, utilities, employee salaries, and equipment leases while the owner is disabled. Which policy is this, and how are its premiums and benefits taxed?

    • A.Disability buy-sell — premiums are deductible and benefits are tax-free
    • B.Business overhead expense — premiums are tax-deductible and benefits are taxable income to the business✓ Answer
    • C.Key person disability — premiums are deductible and benefits are tax-free
    • D.Business overhead expense — premiums are not deductible and benefits are tax-free

    Business overhead expense insurance reimburses actual fixed business expenses — but never the disabled owner's own salary — and is the one business disability policy whose premiums are deductible as an ordinary business expense. Because the premium was deducted, the benefits are taxable income, though they are offset by the deductible expenses they reimburse. Key person DI and disability buy-out premiums are NOT deductible, so their benefits are received tax-free.

    Source: IRC §162 business expense deduction as applied to BOE vs. key person DI and disability buy-out; Uniform A&H outline — tax treatmentReport a problem with this question

34. 34. An employer pays 100% of the premium for a group long-term disability plan and deducts the premium as a business expense. The employee does not report any of the premium as income. When the employee becomes disabled and collects monthly benefits, how are those benefits taxed?

    • A.Tax-free for the first 12 months, then taxable
    • B.Received completely income-tax free by the employee
    • C.Fully taxable as income to the employee✓ Answer
    • D.Taxable only to the extent they exceed the employee's prior salary

    The governing principle is that whoever gets the deduction creates the tax. Because the employer deducted the premium and the employee was never taxed on it, the disability benefits are fully taxable income to the employee. Had the employee paid with after-tax dollars (as with an individually owned DI policy), the benefits would be income-tax free; if premiums were shared, benefits would be taxable in proportion to the employer-paid share.

    Source: IRC §104(a)(3) and §105(a) — employer-paid disability premiums and taxability of benefitsReport a problem with this question

35. 35. Which disability income rider is designed to increase the monthly benefit at future dates WITHOUT requiring new evidence of insurability, allowing the insured to buy more coverage as income rises?

    • A.Cost of living adjustment (COLA) rider
    • B.Social insurance supplement rider
    • C.Waiver of premium rider
    • D.Guaranteed insurability / future increase option rider✓ Answer

    The guaranteed insurability (future increase option) rider gives the insured contractual option dates on which to purchase additional monthly benefit with proof of income only, never proof of health. The COLA rider is different: it increases benefits already in payment during a claim to offset inflation, and the social insurance supplement pays an extra amount only while Social Security disability benefits are not being received.

    Source: Uniform A&H exam outline — Types of Policies: disability income riders (guaranteed insurability / future increase option)Report a problem with this question

36. 36. A partnership funds its buy-sell agreement with disability insurance so that if a partner becomes permanently disabled, the remaining partners have cash to purchase that partner's interest. Which feature is most characteristic of this disability buy-out coverage?

    • A.A long elimination period, commonly 12 to 24 months, with proceeds paid as a lump sum or installments✓ Answer
    • B.Premiums deductible by the partnership as a business expense
    • C.Benefits payable directly to the disabled partner as taxable wage replacement
    • D.A 30-day elimination period with lifetime monthly income benefits

    A disability buy-out policy carries an unusually long elimination period (typically 12–24 months) because the parties must be certain the disability is truly permanent before triggering a forced sale of the business interest. Proceeds fund the purchase as a lump sum or installments, premiums are NOT deductible, and the benefits are therefore received income-tax free by the buying owners.

    Source: Uniform A&H exam outline — Types of Policies: business disability (disability buy-sell/buy-out)Report a problem with this question

37. 37. Which statement correctly describes the typical difference between group short-term disability (STD) and group long-term disability (LTD) coverage?

    • A.LTD pays first and STD begins only after LTD benefits are exhausted
    • B.STD and LTD both require a 90-day elimination period, differing only in the benefit percentage
    • C.STD has a longer elimination period than LTD because it pays a higher percentage of income
    • D.STD has a short elimination period and a benefit period usually measured in weeks or months; LTD has a longer elimination period and benefits measured in years or to retirement age✓ Answer

    STD and LTD are designed to dovetail in sequence: STD carries a very short elimination period (often 0 days for accident, 7 days for sickness) and pays for a limited number of weeks or months, while LTD's elimination period is typically set to begin roughly where STD ends, paying for years or until retirement age. This coordination prevents a gap and prevents duplicate payment.

    Source: Uniform A&H exam outline — Types of Policies: group disability income (short-term vs. long-term)Report a problem with this question

38. 38. Under a tax-qualified long-term care policy, which set of conditions constitutes a valid benefit trigger?

    • A.Inability to perform at least 4 of 6 ADLs for an expected 180 days
    • B.Certification by a licensed health care practitioner of inability to perform at least 2 of 6 ADLs for an expected 90 days, OR substantial supervision needed due to severe cognitive impairment✓ Answer
    • C.A prior 3-day hospital stay followed by admission to a skilled nursing facility
    • D.A physician's certification of medical necessity for care of any duration

    A tax-qualified LTC contract must use the statutory triggers: certification by a licensed health care practitioner that the insured cannot perform, without substantial assistance, at least two of the six ADLs for an expected period of at least 90 days, or that severe cognitive impairment requires substantial supervision. Medical necessity is not a permitted trigger in a tax-qualified policy, and prior hospitalization may not be required.

    Source: IRC §7702B(c)(2); NAIC LTC Model Regulation #641 §29Report a problem with this question

39. 39. Which of the following is one of the six activities of daily living (ADLs) recognized under the NAIC Long-Term Care Insurance Model Regulation?

    • A.Continence✓ Answer
    • B.Housekeeping
    • C.Ambulating
    • D.Managing medications

    The six ADLs are bathing, continence, dressing, eating, toileting, and transferring. 'Ambulating' is a classic distractor — walking is not itself an ADL; the related listed activity is transferring (moving in and out of a bed or chair). Housekeeping and managing medications are instrumental activities of daily living, which are not the statutory triggers.

    Source: NAIC LTC Insurance Model Regulation #641 §5A — definition of activities of daily livingReport a problem with this question

40. 40. An elderly insured needs help with bathing and dressing but requires no medical or nursing skills, and the care is provided by an aide. What level of care is this, and which program is the primary payer for extended care of this type?

    • A.Skilled care — Medicare Part A pays indefinitely
    • B.Custodial care — Medicare Part A pays after a 3-day hospital stay
    • C.Custodial care — Medicaid, not Medicare, pays for extended custodial nursing home care✓ Answer
    • D.Intermediate care — Medicare Part B pays 80%

    Custodial care is non-medical assistance with activities of daily living and can be given by someone without medical training, distinguishing it from skilled care (24-hour, physician-ordered, delivered by licensed nurses) and intermediate care (occasional or intermittent skilled care). Medicare covers only limited skilled care and does not pay for extended custodial care; Medicaid, which is means-tested, is the primary public payer for long-term custodial nursing home care.

    Source: Uniform A&H outline — Social Insurance (Medicare vs. Medicaid) and LTC levels of careReport a problem with this question

41. 41. A long-term care policy pays for a short stay in a facility so that the insured's daughter, who normally provides unpaid care at home, can take a two-week vacation. What benefit is this?

    • A.Home health care
    • B.Respite care✓ Answer
    • C.Adult day care
    • D.Hospice care

    Respite care exists specifically to give temporary relief to an unpaid family caregiver, so the benefit is defined by who is being relieved rather than by the insured's condition. Hospice serves the terminally ill with comfort rather than curative care, adult day care provides supervision during daytime hours at a center while the person returns home at night, and home health care brings skilled or custodial services into the residence.

    Source: NAIC LTC Insurance Model Regulation #641 — covered settings and services (respite care)Report a problem with this question

42. 42. Which combination of consumer protections is required under the NAIC Long-Term Care Insurance Model Regulation?

    • A.A 20-day free look, noncancelable status, and mandatory nursing-home-only benefits
    • B.A 30-day free look, at least guaranteed renewable status, and no exclusion of Alzheimer's disease✓ Answer
    • C.A 30-day free look, cancelable status, and a required prior hospitalization trigger
    • D.A 10-day free look, optionally renewable status, and permitted exclusion of organic cognitive disorders

    LTC policies get a 30-day free look — longer than the usual 10 days on individual health policies — because of the product's complexity and the age of typical buyers. They must be at least guaranteed renewable, so the insurer may never cancel, and Alzheimer's and other organic cognitive disorders cannot be excluded, since cognitive impairment is itself a statutory benefit trigger.

    Source: NAIC LTC Insurance Model Regulation #641 — free look, renewability, and prohibited exclusionsReport a problem with this question

43. 43. A long-term care policyholder stops paying premiums after 12 years. Her policy's nonforfeiture benefit provides a shortened benefit period. What does she receive?

    • A.A reduced daily benefit payable for the original full benefit period
    • B.Continued full coverage with premiums waived for life
    • C.A full cash refund of all premiums paid, less claims
    • D.Paid-up coverage with the same daily benefit amount, but payable for a reduced length of time✓ Answer

    The shortened benefit period nonforfeiture option converts the lapsed policy into paid-up coverage that keeps the ORIGINAL daily or monthly benefit amount but limits how long benefits will be paid, based on the premiums already contributed. Preserving the daily amount matters because daily cost of care is what the policy was sized to cover; the trade-off is duration, not amount.

    Source: NAIC LTC Insurance Model Regulation #641 — nonforfeiture benefit (shortened benefit period)Report a problem with this question

44. 44. A Medicare beneficiary is admitted as a hospital inpatient. Under Medicare Part A, how does a benefit period work?

    • A.It is limited to three benefit periods per lifetime
    • B.It runs for one calendar year and resets each January 1
    • C.It begins on the day of inpatient admission and ends after the beneficiary has been out of a hospital or skilled nursing facility for 60 consecutive days; there is no limit on the number of benefit periods✓ Answer
    • D.It begins at age 65 and continues until the lifetime reserve days are exhausted

    A Part A benefit period is event-based, not calendar-based: it starts on inpatient admission and closes only after 60 consecutive days with no inpatient hospital or skilled nursing care. A beneficiary may have unlimited benefit periods in a lifetime, and each new one restarts the inpatient deductible and the day counts. Lifetime reserve days, by contrast, are a one-time nonrenewable pool of 60 days.

    Source: Medicare Part A benefit period rules — Social Security Act Title XVIII; medicare.govReport a problem with this question

45. 45. Which statement about Medicare Part A skilled nursing facility (SNF) coverage is correct?

    • A.Coverage requires a qualifying 3-day prior inpatient hospital stay and lasts up to 100 days per benefit period, with days 1–20 fully covered and days 21–100 subject to daily coinsurance✓ Answer
    • B.Coverage lasts up to 365 days per benefit period with no coinsurance
    • C.Coverage is unlimited as long as a physician certifies medical necessity
    • D.Coverage begins only after Medicaid benefits are exhausted

    Medicare SNF coverage is post-hospital care, so it is conditioned on a qualifying inpatient hospital stay of at least 3 days. Within each benefit period the structure is 100 days maximum: days 1–20 are paid in full, and days 21–100 require a daily coinsurance amount. This is skilled care only — Medicare does not extend it into ongoing custodial care.

    Source: Medicare Part A SNF benefit — 3-day qualifying stay and 100-day limit per benefit periodReport a problem with this question

46. 46. Which statement correctly describes Medicare Part B and Part C?

    • A.Part B pays 100% of all outpatient charges; Part C replaces Medicaid for low-income seniors
    • B.Part B is automatic and premium-free at age 65; Part C is a federally administered drug-only program
    • C.Part B is voluntary, requires a monthly premium, and generally pays 80% of the approved amount after the annual deductible; Part C (Medicare Advantage) is delivered by private insurers and must provide at least the same benefits as Parts A and B✓ Answer
    • D.Part B covers inpatient hospital stays; Part C is the government's supplement to Medigap

    Part B is the voluntary medical portion: the beneficiary pays a monthly premium, meets an annual deductible, and Medicare then pays 80% of the approved amount for physician services, outpatient care, and durable medical equipment — leaving a 20% gap that Medigap is designed to fill. Part C is not a separate benefit set; it is private delivery of Medicare, and by law a Medicare Advantage plan must cover at least everything Parts A and B cover.

    Source: Social Security Act Title XVIII Parts B and C — program structure; medicare.govReport a problem with this question

47. 47. A woman turns 65 in June and enrolls in Medicare Part B effective June 1. She wants a Medicare supplement (Medigap) policy. Which statement about her open enrollment right is correct?

    • A.She has a 6-month open enrollment period beginning the first month she is both 65 or older and enrolled in Part B, during which an insurer may not deny, medically underwrite, or rate up her application✓ Answer
    • B.She has a 6-month open enrollment period beginning on her 65th birthday regardless of Part B enrollment
    • C.She may be medically underwritten at any time because Medigap is private insurance
    • D.Her open enrollment lasts 12 months and begins when she enrolls in Part A

    Medigap open enrollment is a 6-month guaranteed-issue window triggered by TWO conditions being satisfied at once: attaining age 65 or older AND being enrolled in Medicare Part B. During that window the insurer must issue any Medigap plan it sells at standard rates without health underwriting, which is why waiting past it can leave a beneficiary subject to underwriting or refusal.

    Source: NAIC Medicare Supplement Insurance Model Regulation #651 — open enrollment (6 months, age 65 + Part B)Report a problem with this question

48. 48. Which statement about standardized Medicare supplement (Medigap) plans is correct?

    • A.Every issuer must make Plan A, containing the core benefits, available and may offer other standardized plans only in addition to Plan A, never in place of it✓ Answer
    • B.An issuer may offer any single standardized plan it chooses and need not offer Plan A
    • C.Each insurer designs its own Medigap benefit package subject only to rate approval
    • D.Medigap plans may be sold alongside a Medicare Advantage plan to fill that plan's gaps

    Medigap benefits are standardized by letter so consumers can compare plans on price and service rather than on benefit design, and every issuer must offer Plan A — the core benefit package — as a condition of selling any other plan. Medigap is also designed to supplement Original Medicare only; it cannot be used with, and may not duplicate, a Medicare Advantage plan.

    Source: NAIC Medicare Supplement Insurance Model Regulation #651 — standardized plans and mandatory Plan A offeringReport a problem with this question

49. 49. A 45-year-old with limited income and few assets qualifies for a program that pays for her nursing home custodial care after a spend-down of resources. Which statement correctly distinguishes this program from Medicare?

    • A.Medicaid is a federal-only program with eligibility based on age 65, like Medicare
    • B.Medicaid is a joint federal/state program with eligibility based on financial need, and unlike Medicare it does pay for long-term custodial nursing home care✓ Answer
    • C.Medicaid and Medicare have identical eligibility rules but different benefit schedules
    • D.Medicaid pays only after Medicare's lifetime reserve days are exhausted

    Medicaid is means-tested on both income and assets and is administered by the states within federal rules, so age is irrelevant to eligibility — which is why a 45-year-old can qualify. Its most important contrast with Medicare is that Medicaid finances long-term custodial nursing home care, coverage Medicare does not provide.

    Source: Social Security Act Title XIX (Medicaid) — means-tested eligibility and long-term care coverageReport a problem with this question

50. 50. An insured is disabled and files a claim. Under the NAIC Uniform Individual Accident and Sickness Policy Provisions, which set of time limits is correct?

    • A.Notice of claim within 30 days; claim forms within 30 days; proof of loss within 60 days
    • B.Notice of claim within 15 days; claim forms within 90 days; proof of loss within 20 days
    • C.Notice of claim within 20 days; insurer must supply claim forms within 15 days; proof of loss within 90 days✓ Answer
    • D.Notice of claim within 90 days; claim forms within 20 days; proof of loss within 15 days

    The mandatory provisions run in a logical sequence: the insured gives notice of claim within 20 days of the loss, the insurer must then furnish claim forms within 15 days (if it fails to, the claimant may submit proof in his own words), and written proof of loss is due within 90 days. Related provisions add that no legal action may be brought sooner than 60 days after proof of loss nor later than 3 years.

    Source: NAIC Uniform Individual Accident and Sickness Policy Provision Law (Model #180) — notice of claim, claim forms, proof of lossReport a problem with this question

51. 51. An insured's individual health policy lapses for nonpayment. He submits a reinstatement application with the premium on April 1. The insurer neither approves nor disapproves the application. What happens, and what does the reinstated policy cover?

    • A.The policy is automatically reinstated on the 45th day; it covers accidents from the reinstatement date, but sickness only if it begins more than 10 days after that date✓ Answer
    • B.The policy is automatically reinstated on the 45th day; it covers sickness immediately but accidents only after 10 days
    • C.The policy cannot be reinstated without the insurer's written approval, regardless of how long it waits
    • D.The policy is automatically reinstated on the 10th day; it covers both accident and sickness immediately

    The reinstatement provision protects the applicant from insurer inaction: if the insurer has not disapproved the application, the policy is automatically reinstated on the 45th day after the conditional receipt. The 10-day sickness delay exists to prevent someone from reinstating after symptoms appear, while accidents — which cannot be anticipated — are covered from the reinstatement date.

    Source: NAIC Model #180 — Reinstatement provision (45-day automatic reinstatement; 10-day sickness waiting period)Report a problem with this question

52. 52. An insured pays her individual health premium quarterly and misses the due date. Under the mandatory grace period provision, how long does she have to pay before the policy lapses, and what is her status during that time?

    • A.10 days, and coverage is suspended until payment is made
    • B.31 days, and the policy remains in force during the grace period✓ Answer
    • C.45 days, and coverage is suspended until payment is made
    • D.7 days, and the policy remains in force during the grace period

    The grace period is graduated by premium mode: 7 days for weekly premium policies, 10 days for monthly, and 31 days for all other modes, including quarterly, semiannual, and annual. Coverage stays in force throughout the grace period, so a covered loss occurring during it is payable, though the insurer may deduct the unpaid premium from the claim.

    Source: NAIC Model #180 — Grace Period provision (7/10/31 days by premium mode)Report a problem with this question

53. 53. A policyowner has an individual disability income policy under which the insurer may never cancel the policy and may never increase the premium above the amount stated in the contract, as long as premiums are paid to a stated age. Which renewability classification is this, and how does it differ from the next-strongest class?

    • A.Noncancelable — unlike guaranteed renewable, the insurer cannot raise the premium even for an entire class of insureds✓ Answer
    • B.Guaranteed renewable — unlike noncancelable, the insurer may cancel on any anniversary
    • C.Conditionally renewable — the insurer may raise premiums only for individuals
    • D.Optionally renewable — the insurer may cancel at any time with notice

    Noncancelable is the strongest protection: the insurer can neither cancel nor change the premium, both rights being surrendered. Guaranteed renewable is one step weaker — the insurer must renew, but it retains the right to raise premiums for an entire class of insureds (never for a single individual because of that person's claims or health). This pair is the most commonly confused distinction on the health exam.

    Source: Uniform A&H outline — Policy Provisions: renewability classifications (noncancelable vs. guaranteed renewable)Report a problem with this question

54. 54. An insured changed from an office job to work as a roofer and did not notify the insurer. He is then injured and files a claim. Under the optional 'change of occupation' provision, what may the insurer do?

    • A.Pay the claim in full and cancel the policy at the next anniversary
    • B.Void the policy from inception and refund all premiums
    • C.Reduce benefits to the amount the premium paid would have purchased at the more hazardous occupation's rate✓ Answer
    • D.Deny the claim entirely as a material misrepresentation

    Change of occupation is an adjustment provision, not a forfeiture provision. If the insured moves to a more hazardous occupation, benefits are reduced to what the premium actually paid would have bought at the higher-risk rate; if he moves to a less hazardous one, he may request the lower rate and a premium refund. The policy remains in force either way — the same 'adjust, don't void' logic governs the misstatement of age provision.

    Source: NAIC Model #180 — optional provision: Change of OccupationReport a problem with this question

55. 55. Which statement best describes the purpose and effect of the 'time limit on certain defenses' provision in the NAIC Uniform Individual Accident and Sickness Policy Provision Law (Model #180)?

    • A.It limits how long the insurer may investigate a claim before paying it
    • B.After the stated period, the insurer may not void the policy or deny a claim based on a non-fraudulent misstatement in the application, and may not deny a claim for a pre-existing condition not excluded by name✓ Answer
    • C.It permits the insurer to contest any claim at any time if the loss is large enough
    • D.It sets the deadline by which an insured must sue the insurer after a denied claim

    This provision is the health-insurance analogue of the life incontestability clause and has two prongs: after the stated period runs (Model #180 states three years, though many states enacted two), innocent misstatements in the application can no longer be used to rescind the policy or deny a claim, and a pre-existing condition can no longer be a basis for denial unless it was excluded by name in the policy. Fraudulent misstatements remain contestable where state law permits.

    Source: NAIC Model #180 — Time Limit on Certain Defenses provisionReport a problem with this question

Practice questions cover general, uniform insurance concepts. State-specific laws and limits vary — study your state's official exam outline before testing. Insurance info (NAIC) →