Free Tennessee Accident & Health Practice Questions

Keep these three straight and you'll bank easy points all day: a peril is the cause of loss (fire, wind, theft), a hazard is something that increases the chance or severity of that loss, and risk is the uncertainty of loss itself. The peril is the thing that actually does the damage.

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.

A captive (or exclusive) agent represents a single insurer, and that insurer owns the book of business. An independent agent represents multiple companies and owns their own expirations (the renewal rights). The ownership-of-expirations detail is the classic distinguisher.

Premiums an agent collects belong to the insurer, not the agent, so the agent holds them in a fiduciary capacity, a position of financial trust. Mixing that money with personal funds (commingling) is a big no-no and a fast way to lose a license.

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.

Unilateral means only one side makes a legally enforceable promise, and it's the insurer, who promises to pay covered claims. The insured doesn't actually promise to keep paying premiums; they just won't get coverage if they stop. One enforceable promise equals unilateral.

Representations are statements the applicant believes are true, and they only need to be true to the best of the applicant's knowledge. A warranty is a stronger animal: it's guaranteed to be absolutely true. Concealment is hiding a material fact. For most applications, you're dealing with representations.

A&H insurance exists to handle the two ways your health can cost you money: accidents (sudden injuries) and sickness (illnesses and conditions). Whether the policy pays for medical bills or lost income, those are the two triggering perils. Hook: A&H equals the two perils right in the name, accident and sickness.

Disability income is paid as a stream of periodic payments (usually monthly) for as long as the qualifying disability lasts, up to the policy's benefit period. It functions like a substitute paycheck rather than a one-time payout. Hook: think of it as a replacement salary that keeps coming while you can't work.

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.

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.

A copayment is a set flat fee, say $25 for an office visit or $15 for a prescription, that the insured pays at the point of service. Unlike coinsurance, it doesn't change with the size of the bill. Hook: a copay is a fixed dollar ticket price per service, not a percentage.

Cost-sharing features like deductibles and coinsurance keep the insured financially involved, which both spreads the cost and discourages overusing services for minor issues. That helps hold premiums down for everyone. Hook: cost-sharing gives the insured skin in the game, curbing overuse and helping control premiums.

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.

An attending physician's statement (APS) is a report the insurer obtains, with the applicant's authorization, from the doctor who treated a disclosed condition. It fills in clinical details the application alone can't provide. Hook: when underwriters need the medical specifics, they go to the treating doctor for an APS.

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.

The entire contract is just the policy plus the application attached to it. Nothing outside those documents, not the agent's promises and not the company's internal rules, can be made part of the agreement. Hook: if it isn't in the policy or the attached application, it isn't in the contract.

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.

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.

The unpaid premium provision lets the insurer simply subtract any premium then due and unpaid from the benefits it pays out, rather than denying the claim. Hook: the insurer just nets the overdue premium out of the claim check.

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.

The owner keeps the right to change the beneficiary unless they've named an irrevocable beneficiary, in which case the beneficiary's written consent is required. Hook: revocable means change freely, irrevocable means you need the beneficiary's okay.

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.

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 optional provision excludes losses sustained while the insured is intoxicated or using narcotics not taken on a physician's advice. Prescribed and properly used medications don't trigger the exclusion. Hook: losses while drunk or on non-prescribed narcotics aren't covered.

The free look period, commonly 10 days, lets a new policyowner examine the policy and return it for a full premium refund if they decide it isn't right. Hook: about 10 days to look it over and back out for a full refund.

Presumptive disability treats certain severe losses, such as total loss of sight, hearing, speech, or any two limbs, as automatically and totally disabling, so full benefits are paid even if the insured could technically still work. Often no elimination period applies. Hook: lose sight, hearing, speech, or two limbs and you're presumed totally disabled, no questions asked.

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.

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 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.

This rider lets the insured increase coverage at specified times or as income rises, without proving they're still insurable, which is valuable for someone whose health declines but whose earnings grow. Hook: it locks in the right to buy more coverage later, no new medical questions asked.

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.

The rehabilitation benefit funds vocational training, education, or similar services that help a disabled insured re-enter the workforce, often while disability benefits continue during the program. It serves both the insured and the insurer, who would rather see a return to work. Hook: it pays to retrain you back into a job.

A disability buy-sell arrangement supplies the money for the remaining owners (or the business) to purchase the share of an owner who becomes permanently disabled, mirroring how a life-insurance buy-sell works at death. Hook: it funds the buyout of a disabled owner's stake in the business.

Key person DI pays the business a benefit when an essential employee is disabled, helping cover lost productivity and the cost of recruiting or training a replacement. The business owns the policy and receives the benefit. Hook: it cushions the company when a key player can't work, much like key person life does at death.

Group plans are commonly nonoccupational because employees are already protected on the job by workers' compensation, so the group plan avoids duplicating that coverage and instead handles off-the-job disabilities. Hook: group DI skips on-the-job claims because workers' comp already has them.

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.

A scheduled surgical plan assigns a set dollar benefit to each listed procedure, so an appendectomy pays one amount and a different surgery pays another. If the surgeon charges more than the schedule amount, the insured covers the difference. Hook: a surgical schedule is a fixed price list, one dollar figure per operation.

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.

Supplementary (or superimposed) major medical layers on top of a basic plan, picking up large or extended expenses once the basic plan's limited benefits run out. Hook: supplementary major medical is the backup layer that kicks in after basic runs dry.

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.

The gatekeeper PCP manages each member's care and must provide a referral before the member can see a specialist, which keeps utilization, and cost, under control. Hook: in an HMO, you go through the gatekeeper PCP to reach a specialist.

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.

An HSA belongs to the individual, so it follows them from job to job, the balance rolls over year to year, and it offers strong tax treatment: deductible (or pre-tax) contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Hook: an HSA is yours to keep, rolls over, and is tax-favored coming and going.

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.

A valid insurable group must exist for some primary reason other than getting insurance, such as an employer, a union, or a trade association, so the coverage is incidental and the group isn't just assembled to game the system. Hook: the group has to exist first for another reason, with insurance as a perk, not the point.

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.

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.

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.

COBRA applies to group health plans of employers with 20 or more employees. Smaller employers may be subject to state mini-COBRA laws instead. Hook: 20 employees is the federal COBRA threshold.

Termination of employment (except for gross misconduct) or a reduction in hours is an 18-month qualifying event for the employee under COBRA. Hook: lose the job or the hours, get 18 months of COBRA.

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.

The single-employer, employer-employee group is by far the most common form of group coverage, with the employer as sponsor and policyholder. Other valid groups include associations, unions, and multiple-employer arrangements. Hook: employer-employee is the everyday group plan most people picture.

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.

In a self-funded plan, the employer assumes the risk and pays claims directly out of its own assets, often using a third-party administrator to process them and stop-loss insurance to cap catastrophic exposure. Hook: self-funded means the employer is effectively the insurer, paying claims itself.

A nonscheduled, or comprehensive, dental plan pays a percentage of the UCR charge for each service rather than a fixed dollar amount, so benefits track local prevailing fees. It's the dental version of UCR-based medical coverage. Hook: nonscheduled dental pays a percentage of the going UCR rate, not a fixed table.

Like a medical HMO, a DHMO pays network dentists a capitation fee, a set amount per member assigned to them regardless of services used, and members generally must use network dentists. It emphasizes prepaid, managed dental care. Hook: a DHMO pays dentists per member (capitation), not per procedure.

The 100/80/50 pattern maps to the three dental tiers: preventive/diagnostic at 100%, basic/restorative at 80%, and major at 50%. Knowing this ladder answers many dental questions at a glance. Hook: 100/80/50 equals preventive, basic, major, top to bottom.

To encourage preventive care, plans commonly waive the deductible on cleanings and exams while applying it to basic and major services. That keeps the barrier off the care the plan most wants people to use. Hook: the deductible usually skips preventive care and lands on basic and major work.

Because orthodontic treatment is a one-time, multi-year course, plans cap it with a separate lifetime maximum rather than an annual one. Once that lifetime amount is used, ortho benefits end. Hook: ortho is capped for life, not per year.

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.

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.

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.

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.

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.

Original Medicare is the combination of Part A (hospital insurance) and Part B (medical insurance). Parts C and D are the private add-on options (Advantage and prescription drugs). Hook: Original Medicare equals A plus B, hospital plus medical.

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 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.

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.

Part D is the prescription drug benefit, delivered through private drug plans (either standalone or built into a Medicare Advantage plan). It helps cover the cost of outpatient medications. Hook: Part D is for drugs, the prescription piece of Medicare.

The Medigap open enrollment period runs for 6 months starting when the person is 65 or older and enrolled in Part B. During this window, coverage is guaranteed-issue: the insurer can't deny coverage or charge more for health reasons. Hook: 65 plus Part B starts a 6-month guaranteed-issue Medigap window.

LTC insurance fills the gap left by Medicare, which doesn't pay for ongoing custodial care, by covering help with daily living over an extended period, whether in a facility or at home. Hook: LTC covers the long-term custodial care Medicare leaves out.

Tax-qualified LTC policies generally pay when the insured is unable to perform at least two of the six ADLs (bathing, dressing, eating, transferring, toileting, and continence) for an expected period, or has a severe cognitive impairment. Hook: lose two of the six ADLs and tax-qualified LTC benefits kick in.

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.

Personal health insurance premiums generally aren't deductible, though they may count toward the itemized medical expense deduction if total medical costs clear the AGI threshold. Hook: personal health premiums usually get no deduction, paid with after-tax dollars.

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.

The governing rule is symmetry: tax-free premiums going in lead to taxable benefits coming out, and after-tax premiums going in lead to tax-free benefits coming out. It applies across both individual and group disability coverage. Hook: the tax gets paid somewhere, either on the premium or on the benefit, never both and never neither.

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.

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.

An employer can deduct group disability premiums as an ordinary business expense, just like other employee benefit costs. The trade-off is that the employee is then taxed on the benefits. Hook: the employer deducts the DI premiums, which is why the employee gets taxed later.

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.

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.