Free Illinois Accident & Health Practice Questions

Insurance only deals with pure risk: situations where there's a chance of loss or no loss, but no chance of gain (like your house burning down). Speculative risk involves a chance of loss, no loss, OR gain. That's gambling and investing, and insurers won't touch it. If there's an upside, it's not insurable.

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.

Indemnity is the whole heartbeat of insurance: you get made whole, not rich. The goal is to put you back where you were financially right before the loss, no better, no worse. That's why you can't insure a $20,000 car for $80,000 and cash in. Insurance reimburses a loss; it doesn't hand out winnings.

Insurers like risks that are accidental (due to chance, not intentional) and definite and measurable (you can pin down when, where, and how much). Add in 'predictable for large groups,' 'not catastrophic to the insurer,' and 'affordable premium,' and you've got the recipe for an insurable risk. A loss someone causes on purpose? Not insurable.

Adverse selection is the insurer's headache: the people most likely to have a loss are also the most eager to buy and keep coverage. If underwriting didn't push back, the risk pool would fill up with bad risks and the math would collapse. It's exactly why underwriting and exclusions exist.

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.

A contract of adhesion is written by one party (the insurer) and accepted as-is by the other, with no line-by-line negotiating. The practical kicker: because the insured didn't get to write it, any ambiguity is interpreted in the insured's favor. That's a courtroom rule worth knowing.

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.

Older policies used the stricter accidental means test (the cause had to be unexpected), but the modern trend is the accidental results, or accidental bodily injury, standard, which only requires that the injury be unintended. It's a more generous, claimant-friendly definition. Hook: results, not means; the newer standard looks at the unexpected injury, not the cause.

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.

In group coverage the insurer issues one master contract to the group sponsor (typically the employer), and each covered member receives a certificate of coverage rather than an individual policy. Hook: the employer holds the master contract; employees hold certificates.

Blanket coverage protects a constantly changing group whose members aren't named individually, like airline passengers, campers, or a sports team. You're covered simply because you belong to the defined group during the covered activity. Hook: a blanket covers whoever happens to be under it, no individual names required.

Group coverage is underwritten on the group as a whole, its size, industry, and demographics, rather than screening each person's health. That's why an employee can usually enroll without a medical exam during the eligibility window. Hook: group underwriting looks at the group, not each individual's medical history.

Both require the insurer to keep renewing to a stated age, so neither can drop the insured for health reasons. The difference is price: noncancelable freezes the premium too, while guaranteed renewable lets the insurer raise rates for an entire class. Hook: both guarantee the coverage; only noncancelable also guarantees the premium.

Coinsurance is the sharing percentage that applies once the deductible is met; an 80/20 plan means the insurer pays 80% and the insured pays 20% of covered charges. It keeps the insured with some skin in the game. Hook: coinsurance is the percentage you and the insurer split after the deductible.

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 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.

After the policy has been in force for a set period, commonly two years, the insurer can no longer void it or deny a claim because of misstatements in the application, with fraudulent misstatements being the usual exception. It mirrors the incontestable clause in life insurance. Hook: after about two years, honest application errors can no longer be used against the claim.

If the insurer requires an application for reinstatement and then neither approves it nor rejects it by sending written notice, the policy is automatically reinstated on the 45th day after the application date. Hook: insurer silence for 45 days equals automatic reinstatement.

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 facility of payment clause lets the insurer pay up to a stated amount to a relative or whoever appears equitably entitled, which is useful when there's no living beneficiary or the insured is deceased or incapacitated. It gives the insurer a practical way to settle small amounts without a court. Hook: facility of payment is the insurer's shortcut to pay someone fairly entitled when no beneficiary fits.

Proof of loss is the supporting documentation, bills, statements, and records, that lets the insurer verify a claim and determine what it owes. Without it, the insurer can't properly evaluate the claim. Hook: proof of loss is the evidence file that backs up the claim.

While a claim is pending, the insurer may have the insured examined as often as reasonably necessary and, in the event of death, order an autopsy unless state law forbids it, with the insurer paying for these. Hook: during a claim the insurer can examine (or autopsy) at its own cost to verify the loss.

If the insured moves to riskier work and is later hurt, the insurer can pay reduced benefits, specifically the amount the premium already paid would have purchased at the rate for the more hazardous job. The policy isn't void; the benefit is simply scaled to the risk. Hook: a more hazardous job means benefits shrink to match what your premium buys at the higher-risk rate.

Move to safer work and the insurer reduces the premium to the lower-risk rate, refunding the excess premium already paid for the period. The change works in the insured's favor here. Hook: a safer job means a lower premium and money back.

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.

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.

Insurers cap benefits below full income (and below what you'd net after taxes, since the benefits are often tax-free) so the insured always has a financial reason to recover and return to work. Paying 100% could encourage staying disabled, known as malingering. Hook: benefits stop short of full pay so working still beats collecting.

The COLA rider raises the monthly benefit periodically while the insured is on a long claim, usually tied to an inflation index, so a multi-year disability benefit doesn't lose purchasing power. Hook: COLA keeps a long-running benefit from being eaten away by inflation.

Short-term disability typically replaces a larger share of income (sometimes 60% to 70%) but only for weeks or months, while long-term disability pays a somewhat lower percentage for years or to retirement age. STD covers the early gap; LTD takes over for prolonged disabilities. Hook: STD pays more for a short time, LTD pays steadily for the long haul.

Workers' compensation is an occupational-only program: it pays for work-related injuries and illnesses regardless of fault, but covers nothing that happens off the job. That's why private and group DI often coordinate around it. Hook: workers' comp covers on-the-job harm only.

Social Security disability imposes a five-month waiting period, so benefits start in the sixth full month of disability. Combined with the strict definition, it makes private disability income coverage important for bridging that gap. Hook: Social Security disability makes you wait five months before the first payment.

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.

Basic medical expense plans (hospital, surgical, and physician expense) typically pay from the first dollar with little or no deductible, but they cap benefits at modest limits. They cover routine costs well but can run out fast for a catastrophic claim. Hook: basic plans pay early but shallow, low deductible and low ceiling.

Basic hospital expense pays a daily room-and-board benefit (often up to a stated maximum per day and number of days) plus miscellaneous hospital charges like lab work and medications. It doesn't cover the surgeon, which is surgical expense. Hook: hospital expense pays for the bed and the hospital's charges, not the surgeon.

Major medical is built for big claims: it features high (or no) maximum benefits, a deductible, and coinsurance, in exchange for covering a broad range of expenses. The cost sharing is the trade-off for that wide, deep protection. Hook: major medical goes big and broad, with a deductible and coinsurance along the way.

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%.

HMOs require members to use the plan's network of providers (outside of true emergencies), which is how they control cost and coordinate care. Go outside the network and the service generally isn't covered. Hook: HMO equals in-network only, except for emergencies.

Because HMOs are paid a fixed amount per member, keeping members healthy directly benefits the plan, so they emphasize preventive care and wellness, like checkups and screenings, often at little or no cost. Hook: HMOs push prevention because healthy members cost them less.

In the IPA model, the HMO contracts with independent doctors (or physician groups) who continue to run their own practices and see non-HMO patients too, rather than employing them directly as in a staff model. Hook: IPA doctors keep their own practices and just contract with the HMO.

An EPO is a middle ground: like an HMO, it generally covers only in-network providers (no out-of-network benefits except emergencies), but like a PPO, it usually doesn't require a gatekeeper referral to see a specialist. Hook: EPO equals HMO network rules with PPO-style direct specialist access.

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.

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.

Community rating spreads risk across a wide pool and charges similar rates regardless of any one group's experience, which protects small groups from volatile pricing. It's the counterpart to experience rating. Hook: community rating prices everyone off the shared community pool, not your group alone.

The probationary period is the initial stretch of employment, often 30 to 90 days, that a new hire must complete before becoming eligible to enroll. It's followed by the enrollment (eligibility) period when they can actually sign up. Hook: the probationary period is the wait before a new hire can even enroll.

When the employer pays 100% of the premium (noncontributory), insurers require 100% of eligible employees to be covered. Since employees pay nothing and everyone is in, healthy and unhealthy alike, adverse selection nearly disappears. Hook: the employer pays all, so everyone's in, 100% participation.

Someone who passes up the on-time enrollment window becomes a late enrollee and may have to provide evidence of insurability or wait until an open enrollment period to join. The penalty discourages waiting until you're sick to sign up. Hook: enroll late and you may have to prove insurability or wait, the cost of not signing up on time.

The person continuing coverage pays the full premium, up to 102% of the group rate, with the extra 2% covering administrative cost. COBRA preserves access to the group plan, but not the employer's subsidy. Hook: you keep the group coverage but pay it all yourself, plus a 2% admin add-on.

Creditable coverage is prior, generally continuous, health coverage that gets credited against any pre-existing condition waiting period a new plan might impose, shortening or eliminating it. Hook: creditable coverage is the prior coverage you get credit for when you switch plans.

Coordination of benefits assigns one plan as primary (pays first) and the other as secondary (pays the balance up to allowable limits) so the total paid doesn't exceed the actual expense. Your own employer plan is usually primary for you. Hook: COB just sorts out who pays first and who pays the rest.

For active employees age 65 and older at larger employers, the group health plan is primary and Medicare is secondary, under the Medicare Secondary Payer rules. The retiree situation can differ. Hook: still working at a big employer means the group plan leads and Medicare follows.

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 scheduled dental plan lists a set dollar benefit for each covered procedure, regardless of what the dentist actually charges. If the bill exceeds the schedule amount, the patient pays the difference. Hook: scheduled dental is a fixed price list, one dollar figure per procedure.

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.

Basic restorative procedures typically sit in the middle tier, often paid at around 80%, with the patient covering the remaining 20% after any deductible. Hook: basic care lands in the middle, often about 80% covered.

Major services are usually covered at about 50%, the lowest tier, because they are expensive, so the plan shifts more of the cost to the patient through higher coinsurance. The three-tier 100/80/50 pattern is the classic dental structure. Hook: the bigger and pricier the work, the smaller the share the plan pays, with major care around 50%.

Preventive and diagnostic care covers the routine maintenance items, cleanings, exams, and x-rays, that keep small problems from becoming big ones. Crowns and bridges are major services, and braces are orthodontia. Hook: cleanings and x-rays are textbook preventive care.

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 is usually written as its own standalone plan rather than folded into major medical, with its own premium, deductible, maximums, and benefit tiers. Employers often offer it as a separate elective benefit. Hook: dental typically stands on its own, separate from the medical plan.

Routine vision coverage handles the everyday eye-care items, periodic exams plus eyewear like lenses, frames, and contacts, usually through allowances and frequency limits. Disease and surgery fall under medical coverage instead. Hook: routine vision means exams and eyewear, not eye disease or surgery.

Vision coverage usually separates the exam (the professional service) from the materials (lenses, frames, contacts), each with its own copay, allowance, or frequency rule. Hook: vision splits into the exam and the eyewear materials.

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.

Part A pays for limited, short-term skilled nursing care after a qualifying hospital stay, with full coverage for an initial period and coinsurance after that, but it does not pay for ongoing custodial (long-term) care. That gap is a key reason people buy LTC insurance. Hook: Part A skilled nursing is short and skilled, not long-term custodial.

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 plans are standardized into lettered plans (Plan A, Plan G, Plan N, and so on); a given lettered plan offers identical core benefits no matter which insurer sells it, so consumers can compare on price and service. Hook: same letter equals same benefits, whoever sells it.

Medicaid is a joint federal-state program that provides coverage based on financial need, with income and asset limits, rather than on age or work history. Medicare, by contrast, is largely age- or disability-based and federally run. Hook: Medicaid is need-based coverage; Medicare is earned, age-based coverage.

Because Medicare largely excludes long-term custodial care, Medicaid has become a major payer of nursing home and long-term care, but only after a person has spent down assets to qualify under its strict financial limits. Hook: Medicaid is the big long-term-care payer, once you've spent down to qualify.

The six ADLs are bathing, dressing, eating, transferring (moving in and out of a bed or chair), toileting, and continence. They measure basic self-care, not complex tasks like driving or managing finances. Hook: ADLs are the basics, bathing, dressing, eating, transferring, toileting, continence.

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.

You can't get a tax benefit twice for the same dollar. If you deducted a medical expense and the insurer later reimburses it, that reimbursed amount can become taxable to undo the earlier deduction. Hook: no double-dipping, deduct and then get reimbursed, and the reimbursement is pulled back into income.

Without itemizing, a typical individual gets no federal deduction for personal health premiums; they're paid with after-tax dollars. (Self-employed individuals are a notable exception, covered separately.) Hook: no itemizing usually means no deduction for your health premiums.

When employees fund the premiums themselves with after-tax money, the resulting disability benefits come back tax-free, the same logic as an individually owned policy. Hook: employees paying after-tax premiums collect their DI benefits tax-free.

Just like individual medical expense benefits, group medical benefits reimburse care and aren't treated as income, so they're tax-free to the employee. Hook: group medical benefits reimburse bills, so they're tax-free.

The combination is what makes it powerful: the employer deducts the premium as a business expense, and the employee pays no tax on either the coverage or the benefits. Hook: deductible for the employer, tax-free for the employee, the best of both ends.

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.

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.

Employer-paid medical expense benefits reimburse care and stay tax-free, but employer-paid disability income benefits replace taxable wages, so they're taxable to the employee. The benefit type, not just the funding, matters here. Hook: employer health benefits stay tax-free, while employer-paid disability benefits are taxed because they replace a paycheck.

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.