Life & Health Insurance Practice Test
Insurance Health Policy Types Practice Questions
Health Policy Types makes up 7 of every 50 questions on a Tigertest Insurance practice test. Here are 10 of the 28 questions on it, each with the answer and the reason.
Updated by the Tigertest team. General portion only, on the NAIC model and standard prelicensing texts. Your state portion is separate.
1. Raj earns $6,000 a month. If an insurer limits disability income benefits to 60% of earnings, his maximum monthly benefit is:
- A.$6,000
- B.$3,600
- C.$4,800
- D.$2,400
Answer: B. 60% of $6,000 is $3,600. Insurers cap benefits below full earnings so the insured keeps an incentive to return to work, and $4,800 would be 80% of earnings.
2. Erin wants to lower her disability income premium without reducing her monthly benefit amount. The most direct way is to:
- A.Choose a shorter elimination period
- B.Choose a longer benefit period
- C.Add a cost-of-living rider
- D.Choose a longer elimination period
Answer: D. The elimination period works like a deductible measured in time, so a longer one means fewer claims paid and a lower premium. A shorter elimination period, a longer benefit period or added riders all raise the premium.
3. After an illness, a sales manager returns to her job full time, but her income is 40% lower. Which benefit pays part of her lost income?
- A.Residual disability benefit
- B.Presumptive disability benefit
- C.Waiver of premium benefit
- D.Total disability benefit
Answer: A. Residual disability benefits pay in proportion to the loss of income when the insured can still work but earns less. She is not totally disabled under either an own-occupation or any-occupation definition, and presumptive disability requires a severe loss such as sight, speech, hearing or two limbs.
4. An accountant loses the use of both hands in an accident but returns to work using voice software. Under a presumptive disability provision, he:
- A.Must first serve a new elimination period
- B.Receives nothing, because he returned to work
- C.Receives full total disability benefits
- D.Receives only residual benefits for lost income
Answer: C. Presumptive disability treats certain losses, such as sight, speech, hearing or the use of two limbs, as total disability whether or not the insured keeps working. Full benefits are paid, often with the elimination period waived.
5. A dentist who owns her practice becomes disabled. Which coverage pays her office rent, utilities and staff salaries, but not her own income?
- A.Individual disability income insurance
- B.Key person disability insurance
- C.Business overhead expense insurance
- D.Disability buy-sell insurance
Answer: C. Business overhead expense coverage reimburses the ongoing costs of running the business while the owner is disabled, but never the owner's salary. Its premiums are deductible as a business expense, so the benefits are taxable.
6. A tech company wants funds to replace lost profits and recruit help if its lead engineer becomes disabled. The company should buy:
- A.Key person disability insurance
- B.Group long-term disability insurance
- C.Disability buy-sell insurance
- D.Business overhead expense insurance
Answer: A. Key person disability coverage is owned by and pays the business to offset losses when a vital employee is disabled. Disability buy-sell coverage instead funds the purchase of a disabled owner's share, usually after a long elimination period of 1 to 2 years.
7. A young physician wants the right to buy more disability coverage as her income grows, without new proof of insurability. She needs a:
- A.Social Security rider
- B.Cost-of-living adjustment rider
- C.Waiver of premium rider
- D.Future increase option
Answer: D. The future increase option lets the insured add coverage at set dates or income levels without evidence of insurability. A Social Security rider instead pays an extra benefit when Social Security disability benefits are denied, and a cost-of-living rider adjusts benefits during a claim.
8. A factory worker's individual disability income policy is nonoccupational. If she is injured on the job, the policy will:
- A.Pay only after workers' compensation benefits end
- B.Not pay, because workers' compensation covers it
- C.Pay half benefits, coordinated with workers' compensation
- D.Pay full benefits on top of workers' compensation
Answer: B. A nonoccupational policy covers only off-the-job injuries and illnesses, because work-related disabilities are covered by workers' compensation. An occupational (24-hour) policy covers disabilities both on and off the job.
9. Sam's AD&D policy has a $100,000 principal sum. He loses one hand in a car accident. Under a typical policy, he receives:
- A.$100,000, the principal sum
- B.$50,000, the capital sum
- C.$25,000, a quarter of the sum
- D.$200,000, double indemnity
Answer: B. The principal sum is paid for accidental death or the loss of two members, such as both hands or sight in both eyes. Loss of one member pays the capital sum, usually half the principal: $100,000 x 50% = $50,000.
10. Hank suffers a fatal heart attack while driving, and his car then hits a tree. His accidental death and dismemberment policy will:
- A.Pay twice the principal sum for the crash
- B.Pay the principal sum for accidental death
- C.Pay the capital sum of half the principal
- D.Pay nothing, since illness caused death
Answer: D. AD&D is accident-only coverage that pays only when an accident is the direct cause of death or dismemberment. The heart attack, a sickness, caused his death, so the later crash does not trigger the principal sum.
Practice all 28 health policy types questions, and the rest of the 200-question bank, in the free Insurance training sets. Questions you miss come back until you have mastered them.
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