Free Georgia Accident & Health Practice Questions

Moral hazard equals dishonesty. It's the risk that someone deliberately causes or exaggerates a loss to profit, like torching a failing business for the payout. Don't mix it up with morale hazard (carelessness, choice B) or physical hazard (the actual physical conditions in A and D).

An insurer can't predict whether your house specifically will burn down, but give them a big enough pool of similar homes and they can predict pretty accurately how many out of the whole group will. That's the law of large numbers: more similar exposures, more reliable predictions. It's the statistical engine that makes pricing coverage possible at all.

Reinsurance is insurance for insurance companies. The original insurer (the ceding company) hands off part of its risk to a reinsurer so one giant loss doesn't sink it. Individuals never deal with reinsurers directly; it all happens behind the scenes between carriers.

The law of large numbers needs lots of similar exposures to make predictions reliable. A big pool of comparable homes lets the insurer forecast losses; a handful of wildly different ones doesn't. And concentrating them all in one spot is actually bad: one hurricane could wipe out the whole pool at once.

Participating policies 'participate' in the insurer's profits by paying policy dividends, and are typically issued by mutual companies. Nonparticipating policies don't pay dividends and are typically issued by stock companies. The word 'participate' is your tell.

An admitted (or authorized) insurer holds a certificate of authority from the state and plays by that state's rules. A non-admitted (unauthorized) insurer hasn't been granted one, which is where surplus lines come in for hard-to-place risks. Also worth knowing: domestic equals home state, foreign equals another state, alien equals another country.

A broker works for the insured, shopping the market on the client's behalf, while an agent works for the insurer. Same exam, different masters: keep them straight. Broker equals the buyer's side; agent equals the company's side.

Aleatory means the exchange of value can be lopsided and depends on chance. You might pay $600 in premium and collect $200,000 on a claim, or pay for years and never file one. That built-in inequality, hinging on whether a loss happens, is what makes the contract aleatory.

A waiver is voluntarily surrendering a known right, say, an insurer choosing not to enforce a policy condition. Estoppel is the follow-on: once you've waived something, you can be legally prevented (estopped) from later trying to enforce it. Waiver is the giving up; estoppel is being held to it.

The four elements are agreement (offer and acceptance), consideration, competent parties, and legal purpose. A notarized signature isn't on the list, so it's the odd one out. Consideration, by the way, is what each side brings to the table: the insured's premium and the insurer's promise to pay.

AD&D pays only for losses caused by accidents: a death benefit if an accident is fatal, and a scheduled benefit for accidental dismemberment, such as losing a hand, foot, or eyesight. Death or loss from illness isn't covered. Hook: AD&D is strictly accident-driven; both the death and the dismemberment must come from an accident.

The principal sum is the full benefit, paid for accidental death or for severe losses like both hands or both eyes. The capital sum is a percentage of that principal sum, paid for the loss of a single member or sight in one eye. Hook: principal sum is the whole pie (death or two losses); capital sum is a slice (one loss).

For health insurance, insurable interest must exist when the policy is applied for; you naturally have it in your own health, and, for example, an employer has it in a key employee. Unlike property insurance, it isn't re-tested at the time of loss. Hook: insurable interest is checked at the start, when the application is taken.

Conditionally renewable sits in the middle: the insurer may refuse renewal, but only for specific non-health conditions spelled out in the contract, like an age limit or ending employment. It can't decline simply because the insured got sick. Hook: renewal depends on stated conditions, none of which is the insured's health.

Optionally renewable hands the insurer discretion: at each anniversary or renewal date it can decide whether to renew at all and can raise the premium. It's much weaker protection for the insured than guaranteed renewable. Hook: the insurer holds the option, so renewal is its choice at each renewal date.

The deductible is the insured's upfront share, the amount you pay before the insurer's coverage kicks in for the year. A higher deductible usually means a lower premium, since you're absorbing more of the early cost. Hook: the deductible is what you pay first, before the insurer pays anything.

First the insured pays the $500 deductible. That leaves $4,500, which the 80/20 coinsurance splits, so the insured pays 20% of $4,500, or $900. Add the deductible and the coinsurance share: $500 + $900 = $1,400, while the insurer pays the remaining $3,600. Hook: deductible first, then your coinsurance percentage of what's left, so $500 plus $900 equals $1,400.

The MIB is a nonprofit information exchange whose member insurers report coded medical and risk information. It flags inconsistencies, such as a condition disclosed on a prior application but omitted on a new one, but an insurer can't decline coverage based on MIB data alone. Hook: the MIB is a tip-off network for catching omissions, not a stand-alone reason to decline.

The Fair Credit Reporting Act requires that an applicant be told, in advance, that an investigative consumer report, which gathers information on character, lifestyle, and reputation through interviews, may be obtained. The applicant also has the right to learn the nature and scope of the report. Hook: the FCRA guarantees you advance notice that a lifestyle or reputation report may be pulled.

A substandard, or rated, risk represents a greater-than-average likelihood of claims, so the insurer charges a higher premium (or adjusts the coverage) to offset it, rather than simply declining. Hook: substandard risk means a higher price tag, not an automatic no.

Changes to the contract are valid only when approved in writing by an executive officer of the insurer, and even then they must be noted on or attached to the policy. An agent has no power to waive or alter provisions. Hook: only a company officer can change the deal, never the agent at your kitchen table.

The grace period is a short window after a premium's due date during which the insured can still pay and keep the policy in force, so a late payment doesn't immediately cause a lapse. Hook: the grace period is breathing room to pay late without losing coverage.

Written notice of claim must be given within 20 days after a covered loss, or as soon as reasonably possible. It simply alerts the insurer that a claim is coming. Hook: 20 days to put the insurer on notice that a loss occurred.

The insurer has 15 days after notice of claim to send the claimant the forms used to file proof of loss. Hook: notice of claim starts a 15-day clock for the insurer to provide claim forms.

Proof of loss, the documentation supporting the claim, must be furnished within 90 days after the loss, or as soon as reasonably possible. It's a longer window than the 20-day notice because it requires more detail. Hook: 20 days to notify, 90 days to prove.

The insured generally has up to 3 years (5 in some states) from the time proof of loss is required to file a lawsuit, after which the right to sue expires. Hook: at least 60 days before you can sue, no more than 3 years after, that's the legal-action window.

Because age affects the premium, a misstatement is corrected by adjusting the benefit rather than canceling coverage: the insurer pays what the premium actually paid would have bought at the true age. Hook: a wrong age just resizes the benefit to match what you really paid for.

This provision prevents overinsurance on disability claims: if the benefits from all the insured's disability coverage would exceed their actual earnings, the insurer can proportionally reduce its benefit and refund the excess premium. The goal is to keep disability income from becoming more lucrative than working. Hook: it caps disability benefits at your earnings so you can't profit from being disabled.

This provision lets the insurer avoid paying for losses the insured suffers while committing or attempting a felony or from being engaged in an illegal occupation. Hook: get hurt while breaking the law in a serious way and the policy won't pay.

A probationary period is an initial stretch, often the first 15 to 30 days after the policy starts, during which sickness-related losses aren't yet covered; it keeps someone from buying a policy after symptoms appear. Accident coverage usually begins right away. Hook: a short waiting period at the start before sickness benefits kick in.

The own-occupation definition pays benefits when the insured can't perform the main duties of their specific occupation, even if they could work in some other field. It's the more generous definition because it judges disability against your actual career. Hook: own occ asks only whether you can do your own job.

Own occupation is the more favorable, and more expensive, definition, because it pays when you can't do your specific job regardless of whether you could earn a living elsewhere. Any occ, by contrast, sets a much higher bar to collect. Hook: own occ favors the insured, any occ favors the insurer.

The recurrent disability provision says that a relapse from the same cause within a set time (often six months) counts as a continuation of the prior claim, so the insured doesn't have to satisfy a brand-new elimination period. A later, unrelated disability would start fresh. Hook: same cause, soon after, means it picks up where it left off, no new waiting period.

A longer elimination period means the insurer pays out less often and later, so it charges a lower premium. The insured accepts more of the short-term risk in exchange for a cheaper policy. Hook: wait longer to collect, pay less to own, so a longer elimination period means a lower premium.

The benefit period is the longest span the policy will keep paying for a single disability, such as 2 years, 5 years, or to age 65. A longer benefit period raises the premium. Hook: the benefit period is how long the checks can keep coming.

Once a disability lasts past the waiver's waiting period (commonly 90 days), the insurer waives further premiums for as long as the disability continues, and often refunds any premiums paid during the waiting period. The policy stays fully in force. Hook: stay disabled long enough and the insurer stops charging premiums, sometimes back to day one.

The benefit is simply 60% of monthly earned income: 0.60 times $5,000 equals $3,000 per month. The remaining 40% stays uninsured on purpose, preserving the incentive to return to work. Hook: 60% of $5,000 is $3,000, the monthly check.

A social insurance supplement rider is designed to fill the gap if Social Security disability benefits are denied, delayed, or paid at a reduced amount, paying the supplement in their place and stepping down as Social Security pays. Hook: the SIS rider covers the shortfall when Social Security disability falls through or comes up short.

A return of premium rider refunds part of the premiums paid, less any claims, after a stated number of years, rewarding insureds who stay healthy. It raises the premium in exchange for that potential refund. Hook: stay claim-free and the insurer hands back a chunk of your premiums.

Occupational coverage, sometimes called 24-hour coverage, pays for disabilities arising both on and off the job, around the clock. It's broader, and costs more, than nonoccupational coverage. Hook: occupational/24-hour means covered anytime, anywhere, on or off the clock.

Comprehensive major medical merges basic and major medical into one policy, so a single deductible and coinsurance structure covers everything from routine care up through catastrophic claims. Hook: comprehensive equals basic plus major rolled into one plan with one deductible.

The corridor deductible is the gap the insured must cover between the exhaustion of the basic plan's benefits and the start of the supplementary major medical benefits. It links the two layers together. Hook: the corridor is the deductible bridge between basic running out and major medical starting.

The out-of-pocket maximum (stop-loss) caps the insured's coinsurance share. Once the insured has paid $2,000 in coinsurance, the plan switches to paying 100% of additional covered charges for the rest of the year, protecting against a catastrophic bill. Hook: hit the out-of-pocket max and your 20% share drops to 0%.

A PPO offers a network of providers at discounted rates but still lets members go out of network; they just pay more (higher deductible or coinsurance) when they do. That flexibility is the PPO's main selling point over an HMO. Hook: a PPO lets you leave the network, for a price.

The whole point of managed care is to rein in costs and coordinate care, using networks, gatekeepers, and utilization review, while still aiming to maintain quality. It's a deliberate contrast to open-ended fee-for-service. Hook: managed care manages both the dollars and the care.

HSAs are tied to HDHPs by law: you must be covered by a qualified high deductible health plan (and have no disqualifying coverage) to contribute. The high deductible is what the HSA is meant to help fund. Hook: no HDHP, no HSA, they're a required pair.

An FSA lets an employee set aside pre-tax salary for medical costs, but it traditionally follows a use-it-or-lose-it rule: money not spent by the plan year's end (subject to limited grace or carryover options) is forfeited. Hook: an FSA is pre-tax but use-it-or-lose-it, so don't overfund it.

Consumer-directed plans put more decision-making, and more of the early cost, in the consumer's hands, pairing a high deductible with a tax-favored account so people shop more carefully for care. Hook: consumer-directed means you steer the spending, with skin in the game.

Federal law generally lets young adults stay on a parent's health plan until they turn 26, regardless of student or marital status, when the plan offers dependent coverage. Hook: kids can ride a parent's plan to age 26.

Federal reform requires these plans to cover a core set of essential health benefits (things like hospitalization, prescription drugs, maternity, and preventive care) and bars them from denying coverage or claims based on pre-existing conditions. Hook: a guaranteed benefit floor, and no more pre-existing-condition lockouts.

Once eligible, an employee gets an enrollment period, a limited window often around 31 days, to elect coverage. Enroll on time and no evidence of insurability is required; miss it and they may become a late enrollee. Hook: the enrollment period is your on-time window to sign up without health questions.

A noncontributory plan is fully employer-paid; the employee contributes nothing toward the premium. A contributory plan, by contrast, has the employee pay a share. Hook: noncontributory means the employee does not contribute, so the employer foots the whole bill.

A disability determination (under Social Security rules) during the early part of COBRA can extend the 18-month period to 29 months, and the premium during the extension may rise to as much as 150% of the group rate. Hook: disability stretches COBRA from 18 to 29 months, at a higher premium.

The conversion privilege lets an employee leaving the group switch to an individual policy without proving insurability, though usually at individual (higher) rates and within a limited application window. It protects coverage for someone who has become uninsurable. Hook: conversion turns group coverage into an individual policy with no health questions, but at individual prices.

HIPAA aimed to make health coverage more portable, limiting how pre-existing condition exclusions could be applied when someone changed jobs and crediting prior coverage. It also barred group plans from discriminating based on health status. Hook: HIPAA is about portability, carrying coverage from one job to the next without being penalized for prior conditions.

The birthday rule makes the plan of the parent whose birthday comes first in the calendar year (earliest month and day, not earliest birth year) the primary plan for a dependent child. It's a simple tiebreaker, not based on who is older. Hook: the earlier birthday in the year means the primary plan for the kids.

Coordination of benefits caps the combined payment at 100% of the actual covered expense, here $1,000, no matter how generous each plan is on its own. The primary pays first and the secondary covers the remainder up to that ceiling. Hook: two plans still pay only the real cost, never more than 100%.

Association (or alumni and trade) groups can offer coverage when the association is a bona fide organization formed for reasons other than insurance, with a real purpose, defined membership, and adequate size. Hook: an association group works only if the association is real, not a shell built just to sell coverage.

METs and MEWAs let small employers pool together to obtain group coverage with the buying power and stability of a larger group, something they couldn't easily get alone. Hook: small employers team up through a MET or MEWA to act like one big group.

Self-funded employer plans fall largely under ERISA, a federal law, which is one reason employers choose self-funding: it exempts them from many state insurance mandates. Hook: self-funded plans answer mainly to ERISA at the federal level.

A combination plan blends the two methods, often paying preventive and basic care on a UCR percentage basis while using a fixed schedule for certain services (or vice versa), to balance predictability and flexibility. Hook: a combination plan mixes scheduled and nonscheduled methods in one plan.

A dental PPO contracts with a network of dentists who accept negotiated (discounted) fees, while still letting members see out-of-network dentists at a higher out-of-pocket cost. It mirrors the medical PPO model. Hook: a dental PPO is the discounted-network-with-an-exit-option model.

Plans often require a waiting period (such as 6 to 12 months) before paying for expensive major services, which discourages someone from enrolling, getting costly work, and then dropping the plan. Preventive care is usually available immediately. Hook: big-ticket dental work often comes with a waiting period; cleanings do not.

Only $200 of the annual maximum remains ($1,500 minus the $1,300 already paid), so the plan pays $200 toward this procedure and the patient covers the rest. The annual maximum caps total payments regardless of the individual procedure's coinsurance. Hook: the plan pays only what's left under the annual max, here $200, and the patient absorbs the overage.

With predetermination, the dentist submits the proposed treatment plan and the insurer estimates what it will cover before the work is done, so there are no payment surprises. It's recommended for expensive procedures. Hook: predetermination is a no-surprises preview of what the plan will pay.

The alternate benefit (LEAT) provision lets the plan calculate its payment based on the cheapest treatment that would adequately do the job. If the patient chooses a pricier option, they pay the difference. Hook: the plan pays for the cheapest adequate fix; upgrades are on the patient.

Dental plans generally exclude purely cosmetic work, like whitening or veneers done solely for appearance, since it isn't medically necessary. Functional and preventive care is what's covered. Hook: cosmetic-only dental work is on you; the plan covers function, not vanity.

A managed vision plan that pays providers a fixed amount per member and limits members to its network mirrors the HMO/capitation model, trading provider choice for lower cost. Hook: capitation plus a required network equals the HMO model, applied to vision.

Routine vision, like dental, is usually a standalone elective benefit with its own premium and rules, rather than being built into major medical. Hook: vision, like dental, typically stands alone as its own benefit.

A discount plan isn't insurance: instead of paying benefits, it gives members access to providers who charge negotiated, reduced fees, and the member pays those lower prices directly. There's no claim or reimbursement. Hook: a discount plan buys you cheaper prices, not insurance benefits.

Medicare's standard eligibility age is 65, the same age tied to its origins alongside Social Security. Certain younger people qualify too, such as those who have received Social Security disability for the required period. Hook: 65 is the magic Medicare age.

People already drawing Social Security are usually enrolled in Part A automatically at 65, since Part A is premium-free for those with enough work credits. Part B enrollment may require action because it carries a premium. Hook: Part A usually arrives automatically when you're already on Social Security.

Most people pay no premium for Part A because they (and their employers) already funded it through Medicare payroll taxes while working. Those without enough work credits can buy in by paying a premium. Hook: Part A is usually premium-free, paid for by a lifetime of FICA taxes.

Part A uses benefit periods: one begins when you're admitted and ends after you've been out of a hospital or skilled nursing facility for 60 days in a row. A new stay after that starts a new benefit period (and a new deductible). Hook: a Part A benefit period resets only after 60 days fully out of care.

Part B is medical insurance: it covers doctor visits, outpatient services, preventive care, lab tests, and durable medical equipment like wheelchairs. Inpatient hospital care is Part A. Hook: Part B is the doctor-and-outpatient side of Medicare.

Once the yearly Part B deductible is satisfied, Medicare typically pays 80% of the approved amount and the beneficiary pays the remaining 20% coinsurance. That open-ended 20% is a common reason people add a Medicare Supplement. Hook: Part B pays 80, you pay 20, with no built-in cap on your share.

Medigap is designed to fill gaps in Original Medicare, so it doesn't work with, and shouldn't be sold to, someone on a Medicare Advantage plan. Selling Medigap to an Advantage enrollee is a prohibited practice. Hook: Medigap and Medicare Advantage don't mix, one supplements Original Medicare, the other replaces it.

Part D plans are offered by private insurers approved by Medicare, and enrollment is voluntary (with a possible late penalty for delaying). Beneficiaries choose a plan that fits their medications. Hook: Part D is private, optional drug coverage you sign up for.

Modern LTC policies cover care across a spectrum of settings, skilled nursing facilities, assisted living, adult day care centers, and care provided in the insured's own home, reflecting how people actually receive long-term care. Hook: good LTC follows the care wherever it happens, from a nursing home to your own living room.

Like the elimination period in disability income coverage, the LTC elimination period is the number of days at the start of care the insured pays out of pocket before policy benefits begin; a longer one lowers the premium. Hook: the elimination period is the upfront waiting stretch before LTC benefits start.

Because the insured paid the premiums with after-tax dollars and got no deduction, the disability benefits come back income-tax-free. This is why individual DI benefits aren't reduced by taxes. Hook: after-tax premiums in means tax-free benefits out, the core DI rule.

Employer-paid group health premiums are a deductible business expense, a major reason employers offer health benefits. Hook: the employer writes off group health premiums as a business cost.

When premiums are split, the benefits are taxed in proportion: the part attributable to the employer's deducted premium is taxable, and the part attributable to the employees' after-tax contributions is tax-free. Here that's about 60% taxable and 40% tax-free. Hook: split the premium, split the tax, in the same proportions.

The employer's premium payments aren't taxed to the employee when paid; the tax is deferred to the benefit stage if a claim arises. Hook: the premium isn't taxed now, the benefit is taxed later instead.

Taxability of disability benefits turns on how the premiums were funded: pre-tax employer dollars lead to taxable benefits, after-tax employee dollars lead to tax-free benefits. Hook: follow the premium dollars, pre-tax in equals taxable out.

Since the employer funded and deducted all the premiums and the employee was never taxed on them, the full benefit is taxable income to the employee. Hook: fully employer-funded DI means a fully taxable benefit.

Key person DI premiums are not deductible (the business is also the beneficiary), and the benefits the business receives are income-tax-free, the same nondeductible-in, tax-free-out pattern as key person life insurance. Hook: key person coverage, no deduction in, tax-free out.

Disability buy-sell premiums are not deductible, much like a life insurance buy-sell, and the benefits used to fund the buyout are received income-tax-free. Hook: buy-sell premiums aren't deductible, but the buyout funds come tax-free.

The self-employed health insurance deduction lets self-employed individuals deduct premiums for medical, dental, and qualified LTC coverage above the line, without having to itemize, subject to certain limits. Hook: the self-employed get a special above-the-line write-off for their health premiums.

Benefits from a tax-qualified LTC policy are generally received income-tax-free, up to a stated per diem limit set by law. Amounts above that limit may be taxable unless they reflect actual incurred expenses. Hook: qualified LTC benefits come tax-free, within a daily cap.