Health & Accident Insurance
The health-side foundation: the two perils (accident and sickness), the five covered losses, how health policies are classified, the whole family of limited policies, and dental insurance.
Take a shot at these. Being wrong here is the point — it primes you for the answers, which are all in this lesson.
A 40-employee company is shopping for group health coverage. Its premium will most likely be based on:
For an AD&D death benefit to be payable, most policies require that:
Kim's employer offers a dental plan that shares the medical expense plan's provider network AND its deductible, in exchange for a somewhat lower premium. This is a(n):
"Health and accident insurance" is an umbrella term for every policy that indemnifies people for losses caused by injury or illness — medical expense, disability income, dental, long-term care, accident-only, and a long list of limited specialty plans. This chapter is the map of that territory: what perils are covered, what losses get paid, how policies are classified (individual vs group, private vs government, comprehensive vs limited), and how the narrow "checklist" policies work. The exam mines this chapter for definitional traps — accidental means vs results, principal vs capital sum, morbidity vs mortality — so nail the vocabulary before moving to the product chapters.
What Health & Accident Insurance Is
[2]Health & accident insurance covers the economic costs of losses affecting physical and mental health, well-being, and the ability to perform — it indemnifies the insured for losses from injuries and illnesses. Watch the word "indemnity," though: it carries two different technical meanings. In medical and dental insurance an indemnity plan reimburses covered expenses; in disability, long-term care, and hospital income products it means a flat dollar amount paid periodically, regardless of actual costs.
Which concept does this describe? A broad range of policies covering the economic costs of losses affecting physical and mental health, well-being, and the ability to perform effectively — in short, it indemnifies individuals for losses resulting from injuries and illnesses. Also called health insurance, accident & health, accident & sickness, or sickness insurance.
When the term "indemnity plan" is used to describe traditional medical or dental insurance, it means the plan:
Covered Perils: Accident vs Sickness
[2.1–2.1.2.2]Every health policy addresses the same two covered perils: sickness (internal — sudden or gradual, including occupational disease) and accidents (unintended occurrences from an external source, fixed in time and space). The risk of either is morbidity. How a policy defines "accident" matters enormously: the common, less restrictive accidental bodily injury (results) definition requires only that the injury be unintended, while the restrictive accidental means definition requires both the cause and the result to be unintended — so a voluntary act that ends in an accidental injury pays under "results" but not under "means."
An underwriter refers to "the probability that an applicant will become ill or disabled." She is describing:
Robert, covered by an accident policy, voluntarily jumps to the ground from a questionable but reasonable height and injures his ankle. His policy pays the claim. Robert's policy most likely defines an accident using:
The Five Covered Losses
[2.2.1–2.2.3.4]Health insurance addresses five loss categories: medical expense (reimbursement for hospital, surgical, physician, and outpatient costs — higher deductibles and leaner coinsurance buy lower premiums), disability income (replaces 60–70% of gross earnings, income-tax-free when individually funded, with an elimination period acting as a "time-deductible" — Social Security's strict definition makes it only a secondary source), dental expense, accidental injury including AD&D, and long-term care — which covers physical or cognitive losses from organic causes (dementia, Alzheimer's, Parkinson's) but never psychological conditions like anxiety or depression.
Which of the following conditions would a long-term care policy be expected to cover?
Classes of Health Insurance
[3–3.3]Health policies are classified three ways. Individual vs group: individual contracts require an application and evidence of insurability; group contracts sit between the insurer and the sponsor, priced by experience rating (large groups) or community rating (small groups), with lower administrative costs and extra rules like COBRA continuation. Private vs government: most coverage is private, but Medicare (federal — seniors/severely disabled), Medicaid (joint federal-state — low-income), Social Security disability, and the ACA's exchanges form the social-insurance side. Finally, comprehensive (open-peril) policies cover everything not expressly excluded, while limited policies cover ONLY what's listed — and must carry a "Notice to Insured" disclosure. Related: the limited risk vs special risk contrast — common narrow exposures vs unusual hazards like the ballet dancer's $1M legs.
A major medical policy covers "most recognized medical treatments unless expressly excluded." This makes it:
State insurance departments require a cancer-only policy to provide the policyholder with:
Limited Policy Types
[4–4.8.2]The limited-policy family: an AD&D policy pays a lump sum when an accident is the sole cause of death (within 90 days) or dismemberment — the principal sum is the death benefit and policy maximum, the capital sum (typically 50%) pays for loss of limb, sight, hearing, or speech. A dread disease policy pays scheduled amounts for one named disease, while a critical illness policy pays one lump sum on diagnosis and survival. Hospital indemnity pays the insured a flat amount per day confined, regardless of bills. Credit disability makes loan payments to the creditor — who is both owner and beneficiary. Blanket insurance covers changing members facing the same risk (passengers, teams, volunteer firefighters) with no certificates issued. Round it out with short-term medical (≤ 90 days, non-renewable), prescription drug plans built on a formulary, and vision & hearing plans.
Which concept does this describe? Covers the cost of prescription drugs not dispensed in a hospital or extended care facility. Each plan has a formulary. Typically requires a copayment per fill. Excludes non-prescription (OTC) drugs, appliances, hypodermic needles, third-party administration costs, and usually drugs for sexual dysfunction or infertility (unless state law requires coverage).
Rita's prescription drug plan refused to pay for a medication because it isn't on the plan's list of covered drugs. That list is called the:
Dental Insurance
[5–5.5]Dental insurance is group-dominated health expense coverage focused on diagnostic and preventive care, with annual maximums often under $2,000 — and group dental has no conversion privilege though COBRA applies. Plans come in three structures (standalone, integrated with the medical plan, or combination) and two benefit designs: scheduled plans pay listed services up to a stated max with first-dollar coverage, while the more common non-scheduled plans pay UCR with deductibles and coinsurance across the 100/80/50 treatment levels (preventive/basic/major). Know the seven specialties — endo, perio, prostho, ortho, oral surgery, pediatric, oral pathology — and remember that predetermination of benefits confirms necessity, coverage, and cost shares but never authorizes the procedure.
Before approving Gil's bridgework, his insurer reviewed the proposed treatment to confirm it was necessary and covered, and told Gil his share of the cost. This process:
Which concept does this describe? Specialized health expense coverage focused on diagnostic and preventive treatment, paying for routine dental care and care necessitated by accidents. Generally written on a GROUP basis, subject to a deductible and coinsurance — though preventive care often has no deductible. Includes coverage limitations, exclusions, and an annual benefit limit often under $2,000.
Exam Traps & Review
[6–6.2]The chapter's exam strategy comes down to reading the question's frame: if the issue is a daily benefit for hospital days, think hospital indemnity; if it's the disease that caused hospitalization, think critical illness. Always ask: group or individual? comprehensive or limited? commercial insurer or government program? Then sweep the definitional traps one more time — morbidity vs mortality, means vs results, principal vs capital sum — with the traps deck below.
Which concept does this describe? A policy paying $50,000 for accidental death has a ___ of $50,000 — the most extreme dismemberments (both feet, sight in both eyes) also pay 100% of it.
Glen's AD&D policy has a $100,000 principal sum. In a covered accident he loses one hand. Using the standard exam percentage, the policy pays:
Close your eyes for a moment, then write everything you remember from this chapter — rules, numbers, traps. Recalling first is worth more than rereading.
Recall captured. Compare it against the summary below.
What this chapter covered
- What Health & Accident Insurance IsThe exam tests "indemnity" by context. Expenses reimbursed → medical/dental meaning. Flat periodic amount → disability/LTC/hospital indemnity meaning.
- Covered Perils: Accident vs Sickness⚠️ Morbidity = illness/disability risk; mortality = death risk. And a deliberately caused loss is never a covered accident.
- The Five Covered Losses
- Classes of Health InsuranceExperience rating = LARGE groups' own claims; community rating = SMALL groups. And "what must a limited policy include?" → the Notice to Insured.
- Limited Policy Types⚠️ AD&D exam defaults: complications excluded · 90-day window · capital sum = 50%. And eye DISEASE treatment belongs to medical expense plans, not vision care.
- Dental InsuranceMatch-ups the exam loves: root canal → endodontics · gums → periodontics · dentures → prosthodontics · braces → orthodontics.
- Exam Traps & Review⚠️ Illness arises from INSIDE the person; accidents are EXTERNAL events. That single sentence resolves a surprising number of questions.
Lesson complete — every check passed from memory. Your pretest answers above are now revealed.