Health Policy Provisions, Clauses and Riders — practice questions

11.5% of the exam ≈15 real questions 15 free questions here

The uniform mandatory and optional provisions (written into TIC 1201), plus deductibles, coinsurance, elimination periods and renewability: about 15 of the 130 scored questions, almost all memorization.

Where people lose points

• Grace periods: 7 days weekly, 10 days monthly, 31 days otherwise.
• Notice of claim within 20 days; claim forms within 15 days; proof of loss within 90 days.
• No lawsuit before 60 days after proof of loss, nor after 3 years.
• After reinstatement, sickness is covered only if it begins more than 10 days later.

Questions and answers, explained

All 10 questions above, with the correct answer and why it is correct. Everything here is on health policy provisions, clauses and riders.

1. Which statement correctly distinguishes the probationary period from the elimination period in a disability income policy?

   • AThe probationary period runs once after issue; the elimination period runs after each disabilityCorrect
   • BThe elimination period occurs once at issue, while the probationary period applies to every new claim
   • CBoth terms describe the same waiting period measured from the date of the application
   • DThe elimination period applies only to losses that are caused by accidents

   Why: The probationary period runs once, from the policy's effective date, and typically bars sickness claims that begin during it — protecting the insurer against preexisting illness. The elimination period works like a time deductible: it applies to each disability and must elapse after the disability begins before benefits accrue; choosing a longer elimination period lowers the premium. Choice B states the two definitions in reverse.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

2. A disability income policy rider allows the insured to purchase additional monthly benefit amounts at specified future dates or events without new medical underwriting, provided the insured documents sufficient increased income. This rider is the:

   • ACost-of-living adjustment rider, which indexes benefits to inflation
   • BWaiver of premium rider, which excuses premiums during disability
   • CImpairment rider, which excludes a named preexisting condition
   • DFuture increase option rider, also called guaranteed insurabilityCorrect

   Why: The future increase option — also called guaranteed insurability — locks in the insured's medical insurability: additional benefit amounts can be bought at option dates regardless of health, though financial underwriting (proof of higher earnings) still applies. The closest distractor is the COLA rider, which automatically adjusts benefits for inflation during a claim rather than letting the insured buy more coverage.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

3. A plan has a $500 deductible, 80/20 coinsurance, and a $3,000 out-of-pocket maximum that includes the deductible. At what level of covered expenses in a calendar year does the insured FIRST reach the out-of-pocket maximum?

   • A$12,500
   • B$13,000Correct
   • C$15,000
   • D$3,750

   Why: After the $500 deductible, only $2,500 of the out-of-pocket maximum remains, and that must be filled by 20% coinsurance: $2,500 / 0.20 = $12,500 of post-deductible charges. Add back the deductible and the answer is $13,000 of total covered expenses. Choice A is the closest distractor because it stops at the post-deductible figure and forgets to add the $500 back in.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

4. A family health plan has a $1,000 per-person deductible and a $2,000 family deductible. Alicia incurs $1,600 of covered charges and her husband incurs $700; no other family member has a claim. How much of the family deductible remains unsatisfied?

   • A$0
   • B$300Correct
   • C$700
   • D$1,000

   Why: Only $1,000 of Alicia's $1,600 counts toward the deductible — no one person can contribute more than the individual deductible amount, so once her $1,000 is met the remaining $600 moves into coinsurance and stops accumulating against the deductible. Adding her husband's $700 gives $1,700 credited toward the $2,000 family deductible, leaving $300. Choice A is the closest distractor and results from crediting all $2,300 of charges instead of capping each person's contribution at $1,000.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

5. An insured with a disability income policy providing $3,000 per month and a 90-day elimination period becomes totally disabled on January 15. Benefits accrue only after the elimination period and are paid monthly in arrears. When does the insured receive the FIRST benefit payment, and for how much?

   • AFebruary 15, $3,000
   • BApril 15, $3,000
   • CMay 15, $3,000Correct
   • DApril 15, $9,000

   Why: The 90-day elimination period runs from January 15 to about April 15; benefits then begin to ACCRUE, and because they are paid in arrears the first $3,000 check arrives about May 15. Choice B is the closest distractor — April 15 is when the benefit starts accruing, not when the first payment is made. Choice D reflects the common misconception that the elimination period is paid retroactively; it is a time deductible and is never reimbursed.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

6. Elena is covered as an active employee under her own employer's group plan and also as a dependent under her husband's plan; her husband was laid off and is continuing his coverage under COBRA. Which plan is primary for Elena's own claims?

   • AHer husband's COBRA plan, because that coverage has been in force longer
   • BHer own plan, because active-employee coverage is primary over dependent or continuation coverageCorrect
   • CNeither is primary; the two plans share each claim equally
   • DWhichever plan would provide the larger benefit for the claim

   Why: Two coordination of benefits rules point the same way here: the plan covering a person as an employee is primary over the plan covering that person as a dependent, and a plan covering an active employee is primary over continuation coverage such as COBRA. Choice A applies a length-of-coverage tiebreaker, which is used only after the employee/dependent and active/inactive rules fail to resolve the order.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

7. A group dental plan does not cover crowns or bridges until a member has been enrolled 12 months, and a member's disability income policy does not begin paying until she has been disabled 60 days. Which terms correctly identify these two periods, in that order?

   • ABenefit waiting period; elimination periodCorrect
   • BElimination period; probationary period
   • CGrace period; probationary period
   • DProbationary period; grace period

   Why: A benefit waiting period is measured from the start of coverage and delays access to a specified CLASS of benefits, while an elimination period is measured from the onset of each disability and delays the start of benefit payments. Choice B reverses the two, which is the classic error. The grace period is unrelated to benefits entirely — it is the extra time allowed to pay a late premium before the policy lapses, which rules out C and D.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

8. Which renewability classification permits an insurer to terminate coverage in the MIDDLE of the policy term by giving the required written notice and refunding the unearned premium?

   • ACancelableCorrect
   • BConditionally renewable
   • CGuaranteed renewable
   • DNoncancelable

   Why: Only a cancelable policy lets the insurer end coverage midterm on written notice, with the unearned premium returned — it is the weakest form of renewability for the insured. Choice B is the closest distractor: a conditionally renewable insurer must wait for a renewal date and must have a contract-specified reason, so it can never cancel mid-term. Guaranteed renewable and noncancelable coverage cannot be terminated by the insurer at all while premiums are paid.

   Reference Texas outline #124401, general section VI (Policy provisions, clauses and riders)

9. An insured who made a revocable beneficiary designation on a health policy wants to change the beneficiary. Under the change of beneficiary provision, whose consent is needed?

   • ANo one's; the right to change is reserved to the insuredCorrect
   • BThe current beneficiary's written consent, notarized
   • CA court order, because beneficiaries hold vested rights
   • DThe agent's approval and countersignature on the change form

   Why: Under TIC 1201.218, unless the insured has made an irrevocable designation, the right to change the beneficiary is reserved to the insured, and the beneficiary's consent is not needed to surrender or assign the policy or to change the beneficiary.

   Reference TIC 1201.218 — Texas outline VI.A.12

10. An insured is injured while committing a felony. Under the illegal occupation provision, the insurer:

    • AMust pay, because health policies cover all accidental injuries
    • BMust pay half, with the rest owed by the insured's employer
    • CMay cancel the policy retroactively to its issue date
    • DIs not liable for a loss to which the felony was a contributing causeCorrect

    Why: The optional illegal occupation provision (TIC 1201.226) relieves the insurer of liability for any loss to which a contributing cause was the insured's commission of, or attempt to commit, a felony, or being engaged in an illegal occupation.

    Reference TIC 1201.226 — Texas outline VI.A.15

Topics inside this domain

• Health policy uniform provisions, with the Texas numbers

Drill other domains

• Types of Life Policies and Annuities (11.5%)
• Life Policy Riders, Provisions, Options and Exclusions (11.5%)
• Life Application, Underwriting and Policy Delivery (9.2%)
• Retirement and Other Life Insurance Concepts (6.2%)
• Types of Health Policies (12.3%)
• Social Insurance (4.6%)

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