Life & Health Insurance Exam Prep Graded A+
Basic Medical Expense policies ✔️ provide coverage for hospital, surgical, and physician medical
expenses.
- Can be purchased as an individual or group policy.
- Offer first dollar coverage (no deductibles).
- Have limited benefit periods and low coverage limits.
Major Medical Expense Policy ✔️ serves as a supplement to Basic Medical or can be a stand-alone
policy.
- Available as individual or group coverage.
- Provides coverage once the Basic Policy benefits are exhausted.
Hospital Expenses ✔️ cover costs incurred during a hospital stay.
1. Daily hospital benefit - covers room and board.
2. Miscellaneous expenses - cover additional medical expenses (e.g., X-rays, MRIs, prescriptions, doctor
visits).
Daily Hospital Benefit ✔️ refers to the cost of a hospital room, with a maximum daily limit. This limit
may be defined as a specific dollar amount (e.g., $500 per day) or as Usual, Customary, and Reasonable
(UCR) charges.
Usual, Customary and Reasonable (UCR) ✔️ determines how much an insurance company pays for a
procedure based on the average charges in a specific geographic area. The coverage often includes a
maximum amount and limits on the number of days.
Benefit Schedule ✔️ specifies what is covered in the plan and the associated amounts, subject to
maximum limits or duration.
Indemnity ✔️ means the insured settles the bill and is reimbursed by the insurance company up to a
specified limit amount. Medical expense policies that pay a fixed rate provide a stated benefit for each
day the insured is hospitalized.
,Reimbursement ✔️ allows policyholders to obtain medical treatment from any provider and then
submit charges to their insurer for reimbursement (actual amounts incurred).
Service Based Contracts ✔️ directly pay doctors and hospitals based on the number of coverage days
specified in the contract. These plans are prepayment schemes. After a claim is settled, the insured
receives an Explanation of Benefit (EOB) confirming payment. Examples include Blue Cross, Blue Shield,
Health Service Corporations, and Medicare.
Miscellaneous Expense Benefits ✔️ are secondary benefits incurred inside the hospital, related to the
stay, such as X-rays, prescriptions, MRIs, anesthesia, and lab fees. These expenses typically have
separate limits, known as Inside Limits, often expressed as a multiple of the daily amount (UCR).
Surgical Expense ✔️ provides a schedule of procedures that lists allowable amounts for each. Even if a
procedure is not listed, it may still be payable, based on its difficulty compared to similar procedures.
Generally, there are no deductibles.
Surgical Schedule ✔️ is a price list specifying each procedure along with its associated dollar amount. If
not listed, the procedure will still be compensated.
Relative Value ✔️ is a method for determining benefits based on the region an insured resides. It
assigns a value to each procedure, using a conversion factor and a points system included in the policy.
Physicians Medical Expense ✔️ covers doctor visits (in office or hospital) and post-operative care.
Payments may be based on a per-visit benefit or UCR. It may have a deductible or may not, and is
usually structured as an indemnity plan with first dollar coverage.
Major Medical Expense ✔️ is designed to cover catastrophic losses, defined as costs exceeding basic
coverage.
- Features high maximum limits (e.g., $2,000,000).
- Includes deductibles (per person or family annually).
- Often has coinsurance (commonly 80/20%).
, - May offer stop loss provisions and miscellaneous expense benefits, including X-rays, MRIs, lab tests,
etc.
Coinsurance ✔️ begins after the deductible is met, where the insured shares expenses with the
insurance company (e.g., 80/20, 70/30). This amount is also termed the percentage participation
requirement.
Flat Deductible ✔️ is the portion of medical expenses the insured must pay annually before benefits
kick in. A higher deductible typically results in lower annual premiums. If an incident occurs in the final
three months of a plan year, and the annual deductible is met, that incident may be covered in the new
plan year, leading to a "carryover" of the paid deductible.
Per Cause Deductible ✔️ applies a separate deductible for each distinct illness or accident.
Stop Loss ✔️ sets a maximum out-of-pocket expense for the insured. Once this limit is reached during a
calendar year, the insurer will pay 100% of remaining covered expenses. This is calculated by adding the
total of deductibles and coinsurance amounts.
Comprehensive Major Medical ✔️ combines Major Medical and Basic Medical into one policy.
Corridor Deductible ✔️ is applicable in the middle of a hospital stay, covering the gap between basic
and major medical plans.
Pre-Existing Condition ✔️ is necessary to prevent adverse selection. A pre-existing condition is defined
as any medical issue for which the insured sought medical advice or treatment within the six months
prior to the policy. Individual policies can exclude such conditions for up to 24 months, whereas group
policies can do so for up to 12 months, and late group enrollees for 18 months.
Exclusions in Basic and Major Medical ✔️ include:
- Injuries resulting from war or military conflicts.
- Elective cosmetic surgeries.
- Routine dental care.
