Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Correct answer: An unforeseen, unintended and unexpected event that causes bodily injury

An accident is an unforeseen, unintended and unexpected event that causes bodily injury. Health insurance recognises two perils: accident and sickness.

Correct answer: Illness or disease that first manifests, or is first treated, after the policy takes effect

Sickness means illness or disease. Disability income policies, and other policies that may still limit pre-existing conditions, traditionally cover sickness that first manifests, or is first treated, after the policy is in force. Comprehensive major medical coverage under the Affordable Care Act cannot exclude pre-existing conditions.

Correct answer: Indemnity basis

An indemnity basis pays a fixed amount per day or per procedure regardless of the actual cost of care. A flat $200 per hospital day is an indemnity benefit.

Correct answer: Service basis

On a service basis, the plan provides the medical care directly instead of paying money to the insured. HMOs are the standard example.

Correct answer: Reimbursement basis

A reimbursement basis repays the insured for covered expenses actually incurred, which is what happened when Luis submitted his receipt.

Correct answer: The stated amount paid for accidental death

AD&D pays a stated principal sum for accidental death and a scheduled share of it for the loss of limbs or sight.

Correct answer: A scheduled portion of the principal sum

AD&D pays the full principal sum for accidental death and a scheduled portion of it for the loss of limbs or sight.

Correct answer: cannot perform activities of daily living or has a cognitive impairment

Long-term care coverage pays for extended custodial, intermediate or skilled care when the insured cannot perform activities of daily living or has a cognitive impairment.

Correct answer: A certificate of insurance under the employer's master contract

A group policy is a single master contract issued to an employer or association. Members do not get their own policies; they receive certificates of insurance.

Correct answer: The group, not the individual, is underwritten

In group insurance the insurer underwrites the group as a whole, its size, make-up and purpose, rather than each member. That is the key contrast with medically underwritten individual products, such as individual disability income insurance, where the insurer reviews the applicant's own health. Individual major medical coverage under the Affordable Care Act cannot be underwritten on health status.

Correct answer: Medicaid

Medicaid is the needs-based health program run jointly by federal and state governments. Medicare is based on age 65 or certain disabilities.

Correct answer: People aged 65 and over, and certain disabled people

Medicare is the federal health program for people aged 65 and over and for certain disabled people.

Correct answer: A limited policy

A limited policy covers only specified accidents, diseases or benefit amounts. Hospital indemnity, which pays a set amount per hospital day and nothing else, is a classic limited policy.

Correct answer: Injury caused by war or an act of war

War and acts of war are a standard exclusion because losses from war are catastrophic and cannot be predicted or spread across a pool of insureds. A separate exclusion for injury during military service applies because the government provides care for service members.

Correct answer: Excluded, because he was not a fare-paying passenger on a scheduled airline

The aviation exclusion removes coverage for injuries in flight except as a fare-paying passenger on a scheduled airline. Piloting his own plane falls outside that exception.

Correct answer: Excluded as an intentionally self-inflicted injury

Accident-only and other limited accident policies commonly exclude intentionally self-inflicted injury. Such an injury is not accidental and is within the insured's control. Comprehensive medical coverage is different: it generally cannot refuse to treat an injury because it resulted from a mental health condition.

Correct answer: Reconstructive surgery to repair facial injuries from a car accident

The cosmetic surgery exclusion usually carves out surgery to repair an injury or a congenital defect. Reconstruction after an accident falls within that exception.

Correct answer: Excluded, because care in a government facility at no cost to the insured is not covered

Health policies commonly exclude care received in government facilities, such as a Veterans Administration hospital, at no cost to the insured. Care for a service-connected disability is free to the veteran and is not billed to private insurance, so the insured has incurred no expense for the policy to cover. For care that is not service-connected, federal law lets the VA bill the private insurer.

Correct answer: Comprehensive major medical coverage under the Affordable Care Act cannot exclude pre-existing conditions, but limited and disability policies may

The Affordable Care Act bars pre-existing condition exclusions in comprehensive major medical coverage. Limited and disability income policies may still exclude them.

Correct answer: Accidental death and dismemberment insurance

AD&D pays only for death or dismemberment caused by an accident. The other coverages respond to both perils.

Correct answer: Experimental or investigational treatment

Experimental or investigational treatment is a common exclusion, although insureds have appeal rights over such decisions.

Correct answer: The government provides coverage for those losses

Injury during military service is excluded mainly because the government provides care and benefits to service members for those losses. The war exclusion is a separate matter: war losses are catastrophic and cannot be pooled, and civilians injured by war are not generally covered by the government.

Correct answer: As a periodic benefit, usually monthly, after an elimination period

Disability income insurance replaces part of earnings with a periodic benefit, usually monthly, after an elimination period.

Correct answer: Private and group

Private plans are sold by insurers, HMOs and similar carriers. Coverage bought by an employer for its employees under one contract is group coverage.

Correct answer: Medicare

Government programs include Medicare, Medicaid and Social Security disability. The other choices are sold by private carriers.