Delaware Life & Health Insurance Exam — All Questions

The 'proof of loss' mandatory provision typically requires the insured to furnish written proof within:

• a.10 days of the loss
• b.24 hours of the loss
• c.3 years of the loss
• d.90 days after the loss, or as soon as reasonably possible✓

Proof of loss is generally due within 90 days of the loss, or as soon as reasonably possible where 90 days is not feasible. The other intervals do not reflect the uniform provision.

The 'time of payment of claims' provision requires the insurer to pay claims:

• a.Only at the end of the calendar year
• b.Immediately, or within a stated period, after receiving acceptable proof of loss✓
• c.Only after the contestable period ends
• d.Whenever the insurer chooses, since no provision sets a firm deadline for paying an approved claim to the insured

This provision requires prompt payment once proof of loss is received, within the period the provision states. The insurer cannot delay at will or hold claims for year-end or the contestable period.

The 'legal actions' mandatory provision states that an insured may not sue the insurer until a set time after proof of loss, and no later than a stated outer limit. Those periods are commonly:

• a.1 year and 2 years
• b.immediately and never
• c.60 days after proof of loss and no more than 3 years after proof was required✓
• d.10 days and 6 months

The legal actions provision typically bars suit for 60 days after proof of loss and requires any suit within about 3 years. This gives the insurer time to process while preserving the insured's right to sue.

The mandatory 'physical examination and autopsy' provision allows the insurer, at its own expense, to:

• a.Raise the policy's premium at any point while a claim is being investigated by the company's claims department
• b.Deny all pending claims automatically
• c.Cancel the coverage during a claim
• d.Examine the insured while a claim is pending and require an autopsy where not forbidden by law✓

This provision lets the insurer verify a claim by examining the insured or, in a death claim, ordering an autopsy where state law permits, all at the insurer's cost. It does not authorize automatic denial, premium hikes, or cancellation.

In individual health insurance, the length of the grace period usually depends on the:

• a.Premium payment mode (for example, 7 days for weekly, 10 days for monthly, 31 days for other modes)✓
• b.The insured's current attained age, with older insureds automatically receiving a longer grace period than younger ones
• c.Insured's state of residence only
• d.Amount of the policy's benefits

The health grace period varies with how often premiums are paid, longer intervals get longer grace periods. It is not tied to age or benefit amount.

After an individual health policy has been in force for the period stated in the 'time limit on certain defenses,' a claim for a pre-existing condition that is NOT specifically excluded by name:

• a.Can always be denied by the insurer
• b.Doubles the policy's premium going forward whenever a pre-existing condition is discovered by the insurer after issue
• c.Automatically voids the entire policy
• d.Cannot be denied merely because the condition existed before the policy took effect✓

Once the time limit passes, the insurer cannot deny a claim solely because the condition predated the policy, unless it was specifically named and excluded. It does not void the policy or change the premium.

Under the optional 'change of occupation' provision, if an insured changes to a MORE hazardous occupation, benefits will generally be:

• a.Reduced to what the premium already paid would purchase at the more hazardous classification✓
• b.Terminated immediately
• c.Left completely unchanged
• d.Increased to reflect the added risk

Moving to a riskier job means the premium paid buys less coverage, so benefits are reduced to that level rather than the insurer collecting more. Benefits are not increased, unchanged, or terminated.

If an insured changes to a LESS hazardous occupation, the change of occupation provision allows:

• a.The policy to be canceled
• b.No change of any kind
• c.The premium to be reduced and any excess refunded✓
• d.Benefits to be reduced

A safer occupation entitles the insured to a lower rate, with the overpaid premium refunded, since the risk decreased. Benefits are not cut and the policy is not canceled.

In a health policy, the misstatement of age provision adjusts the ________ to what the premium paid would have purchased at the correct age:

• a.policy deductible
• b.benefits✓
• c.premium payment mode
• d.provider network

As in life insurance, a health misstatement of age is fixed by adjusting benefits to reflect what the premium actually paid would buy at the true age, rather than voiding the policy. Mode, deductible, and network are unaffected.

The optional 'illegal occupation' and 'intoxicants and narcotics' provisions let the insurer deny claims for losses that:

• a.Involve a minor illness
• b.Occur only on weekends or public holidays, when the insured is presumed to be away from the regular workplace
• c.Occur while the insured is at work
• d.Result from the insured committing a felony or being under the influence of non-prescribed narcotics✓

These optional provisions exclude losses stemming from the insured's illegal activity or intoxication by non-prescribed narcotics. Ordinary work, weekend, or minor-illness losses are not what they target.

The insuring clause of a health policy:

• a.Sets out the types of losses covered and the insurer's promise to pay benefits✓
• b.States the premium and payment mode
• c.Names the policy's beneficiary
• d.Lists the specific exclusions and limitations that remove certain losses from the policy's coverage

The insuring clause states what the policy covers and the insurer's promise to pay. Exclusions, premium terms, and beneficiary designations are handled in other parts of the contract.

A probationary period in a health policy is:

• a.The waiting time after each disability before benefits begin
• b.The time allowed to return the policy for a refund
• c.An initial period after the effective date during which sickness-related claims are not covered✓
• d.The window during which the insurer is required to pay an approved claim after receiving the proof of loss

The probationary period is a one-time wait at the start of coverage before certain (usually sickness) claims are payable. Returning for a refund is the free-look, and the post-disability wait is the elimination period.

How does an elimination period differ from a probationary period?

• a.The probationary period applies once at the start of the policy to new sickness claims, while the elimination period is the waiting time after each disability begins before benefits are paid✓
• b.Neither one affects when benefits are paid
• c.The elimination period applies only to death claims
• d.They are simply two different names for the exact same single waiting period, which is applied only one time at the very beginning of the policy and is never applied again for any later claim or subsequent disability

The probationary period is a single initial wait; the elimination period recurs, delaying benefits after each covered disability starts. Both affect benefits, and neither concerns death claims specifically.

In a disability policy, the benefit period is:

• a.The contestable period
• b.The waiting time before benefits start
• c.The maximum length of time benefits will be paid for a covered disability✓
• d.The policy's grace period

The benefit period caps how long benefits continue for a claim. The pre-benefit wait is the elimination period, and grace and contestable periods are unrelated concepts.

A pre-existing condition provision allows the insurer to:

• a.Limit or exclude benefits for a condition treated or manifesting before the effective date, for a stated time✓
• b.Deny all future claims of any kind for the entire life of the policy once a pre-existing condition has been identified
• c.Cover every condition immediately with no limits
• d.Increase the policy's death benefit

The provision lets the insurer restrict coverage for conditions that existed before the policy, but only for a defined period, after which they are covered. It does not bar all claims or add a death benefit.

The coordination of benefits (COB) provision in group health coverage is designed to:

• a.Prevent an insured with more than one plan from recovering more than 100% of the actual expenses✓
• b.Double the deductible the insured owes so that the two plans together collect a larger share of the actual costs
• c.Cancel the insured's secondary coverage
• d.Let an insured collect full benefits from two plans and profit

COB establishes which plan pays first and limits total recovery to the actual expense, preventing profit from double coverage. It does not cancel coverage or raise deductibles.

Under COB, when a child is covered by both parents' group plans, the 'birthday rule' usually makes the primary plan the one belonging to the parent whose:

• a.Coverage has been in force longer
• b.Income is higher
• c.Birthday falls earlier in the calendar year✓
• d.Plan has the lower deductible

The birthday rule assigns primary status to the plan of the parent whose birthday comes first in the year (month and day, not year of birth). Coverage length, income, and deductible are not the deciding factor.

Subrogation in a health or medical policy allows the insurer, after paying a claim caused by a third party, to:

• a.Retain all of the insured's future premiums
• b.Deny the claim it already paid and demand that the insured personally return all of the benefit money received
• c.Recover the amount paid from the responsible third party or from the insured's recovery against that party✓
• d.Increase the insured's benefits going forward

Subrogation lets the insurer step into the insured's shoes to recover its payment from the at-fault party. It does not undo the claim, seize premiums, or raise benefits.

The main purpose of subrogation is to:

• a.Reduce the insurer's underwriting duties
• b.Prevent the insured from being paid twice for the same loss and hold the at-fault party responsible✓
• c.Extend the policy's grace period so the insured has additional time to pursue the responsible third party
• d.Reward the insured for filing a claim

Subrogation stops double recovery and shifts the cost to the party that caused the loss. It is unrelated to rewarding the insured, underwriting, or grace periods.

A recurrent disability provision states that if an insured returns to work but becomes disabled again from the same cause within a stated time (such as 6 months), it is treated as:

• a.A brand-new disability requiring a new elimination period
• b.A pre-existing condition
• c.An excluded loss not payable
• d.A continuation of the original disability, with no new elimination period✓

A relapse from the same cause within the recurrent-disability window is treated as one continuous claim, so the insured need not satisfy a new elimination period. If the gap were longer, it would be a new disability.

An impairment (exclusion) rider on a health policy:

• a.Lowers the policy's deductible
• b.Adds coverage for a specified condition
• c.Guarantees the policy's renewal
• d.Permanently excludes coverage for a specified condition or body part✓

An impairment rider excludes a particular condition the applicant already has, allowing the insurer to issue coverage for everything else. It does not add coverage, cut deductibles, or guarantee renewal.

A 'noncancelable' health policy guarantees that the insurer:

• a.Can change the benefits whenever it wishes
• b.Cannot cancel and cannot raise the premium above the amount stated in the policy, as long as premiums are paid, until a stated age✓
• c.May raise the premium at any time
• d.May refuse to renew the policy each year and may also increase the premium at any renewal based on the individual insured's changing health

Noncancelable is the strongest renewal guarantee: the insurer can neither cancel nor increase the premium beyond the scheduled amount up to a stated age. It cannot non-renew or alter benefits at will.

A 'guaranteed renewable' health policy allows the insurer to:

• a.Cancel the policy at any time it chooses, provided only that it gives the insured advance written notice
• b.Refuse renewal for a single insured
• c.Guarantee renewal to a stated age but adjust premiums by class, not for one individual✓
• d.Change an individual insured's benefits

Guaranteed renewable means the insurer must renew to a stated age but may raise premiums for an entire class of insureds. It cannot cancel, single out one insured, or change benefits arbitrarily.

A conditionally renewable health policy permits the insurer to non-renew:

• a.Only for reasons stated in the policy, such as reaching an age or leaving employment, not the insured's declining health✓
• b.For any reason, including the insured's declining health
• c.Never decline renewal under any circumstance, so the coverage effectively continues for the insured's entire lifetime automatically
• d.Only during the first policy year

Conditionally renewable lets the insurer decline renewal only for specified events (age, employment status), but not because the insured's health worsened. It is more restrictive to the insured than guaranteed renewable but not a free hand for the insurer.

Compared with an 'any-occupation' definition, an 'own-occupation' definition of total disability generally results in a premium that is:

• a.Higher, because the insured qualifies for benefits more easily✓
• b.Lower, because claims are less likely
• c.Zero, because own-occ coverage is free
• d.Identical, because the definition does not affect pricing

Own-occupation pays if the insured cannot perform their own job even if they could do another, making claims more likely and the premium higher. Any-occupation is stricter and therefore cheaper.

A 'split definition' of disability commonly uses:

• a.No formal definition of disability at all, leaving each claim entirely to the insurer's sole discretion to decide
• b.Any-occupation from the very first day
• c.Own-occupation for the entire benefit period
• d.Own-occupation for an initial period (such as 2 years), then any-occupation thereafter✓

A split definition applies the generous own-occupation standard early, then switches to the stricter any-occupation standard for the remainder of the claim, balancing protection and cost.

A residual disability benefit pays a proportional benefit when the insured:

• a.Voluntarily chooses to retire early even though the disability would not otherwise prevent full-time work
• b.Has fully recovered and returned to normal earnings
• c.Is totally and permanently disabled
• d.Returns to work but earns less because of the disability, based on the percentage of income lost✓

Residual (partial) disability benefits pay in proportion to lost income when the insured works but earns less due to the disability. It does not apply to total disability, full recovery, or voluntary retirement.

Under a presumptive disability provision, the insured is automatically considered totally disabled, often with no elimination period, upon:

• a.Any minor injury
• b.A voluntary change of jobs
• c.A brief hospital stay
• d.The loss of sight in both eyes, loss of hearing or speech, or the loss of use of two limbs✓

Presumptive disability treats certain severe losses, such as sight, hearing, speech, or two limbs, as total disability automatically, usually waiving the elimination period. Minor injuries or job changes do not qualify.

Individual disability income benefits are usually limited to roughly 60 to 70% of earned income so that:

• a.The insurer can earn a larger profit
• b.The insured retains a financial incentive to return to work, avoiding overinsurance✓
• c.The premium can be set higher
• d.The disability benefits would automatically become fully taxable to the insured once they exceed half of prior income

Capping benefits below full income prevents overinsurance and keeps a return-to-work incentive, since being disabled should not pay better than working. It is not about insurer profit, premium level, or taxation.

When an individual pays disability income premiums with after-tax dollars, the benefits received are:

• a.Taxed as capital gains
• b.Received income-tax-free✓
• c.Subject to a 10% penalty
• d.Fully taxable as ordinary income

Because the premiums were paid with already-taxed money, individually purchased DI benefits are received tax-free. Employer-paid premiums that were not taxed to the employee produce taxable benefits.

If an employer pays the disability income premiums and does not include them in the employee's income, the disability benefits the employee later receives are:

• a.Deductible by the employee
• b.Taxable as income to the employee✓
• c.Received completely tax-free
• d.Exempt from all federal tax rules

When the employer deducts the premiums and does not tax them to the employee, the resulting benefits are taxable to the employee. The flip side of tax-free premiums is taxable benefits.

Business overhead expense (BOE) insurance is designed to:

• a.Fund the disabled owner's personal retirement savings so that income continues after the business eventually closes
• b.Pay the owner's estate taxes
• c.Replace the disabled owner's personal salary
• d.Reimburse a disabled business owner for ongoing business expenses such as rent, utilities, and employee wages✓

BOE covers the fixed operating expenses of a business while the owner is disabled, keeping the doors open; it does not replace the owner's own income. Retirement and estate taxes are separate needs.

Business overhead expense benefits are generally ________, and the premiums are generally ________:

• a.received completely tax-free, while the premiums are also fully deductible as an ordinary business expense
• b.taxable, because they reimburse deductible expenses; deductible as a business expense✓
• c.taxable; not deductible
• d.tax-free; not deductible

BOE premiums are deductible as a business expense, and because they fund deductible overhead, the benefits received are taxable. This mirrors the general rule that deducted premiums lead to taxable benefits.

Key person disability insurance is owned by and pays benefits to:

• a.The federal government
• b.The key employee's family
• c.The key employee personally
• d.The business, to offset losses when a vital employee becomes disabled✓

Key person coverage is owned by the business, which is the beneficiary, to cushion the financial loss from a crucial employee's disability. It does not pay the employee or their family.

A disability buy-sell policy provides funds to:

• a.Buy out a disabled owner's business interest under a buy-sell agreement✓
• b.Replace the business's lost profits during the entire period that the owner remains totally disabled
• c.Pay the disabled owner's personal medical bills
• d.Pay the business's overhead expenses

A disability buy-sell funds the purchase of a disabled owner's share by the remaining owners or the business, per the buy-sell agreement. Medical bills, lost profits, and overhead are addressed by other coverages.

A Social Insurance Supplement (SIS) rider on a disability policy pays benefits when the insured is:

• a.Disabled but does NOT qualify for, or receives reduced, Social Security disability benefits✓
• b.Retired and collecting a pension
• c.Deceased
• d.Always disabled, regardless of other benefits

An SIS rider fills the gap when Social Security disability is denied or reduced, coordinating with the government benefit. It does not pay on top when full Social Security is received, nor at retirement or death.

A cost-of-living adjustment (COLA) rider on a disability policy:

• a.Waives the premium during disability
• b.Gradually shortens the benefit period each year in exchange for a higher initial monthly benefit amount
• c.Reduces the monthly benefit over time
• d.Increases the monthly benefit during a long claim to keep pace with inflation✓

A COLA rider raises benefits during an extended claim to offset inflation, protecting purchasing power. It does not reduce benefits, shorten the benefit period, or waive premiums.

A future increase option (guaranteed insurability) rider on a DI policy lets the insured:

• a.Buy additional monthly benefit as income grows, without new medical underwriting✓
• b.Skip the elimination period on claims
• c.Change occupations with no tax effect
• d.Decrease the monthly benefit only, in order to lower the premium as the insured grows steadily older

The future increase option lets the insured raise the benefit as earnings rise, without proving insurability again. It does not reduce coverage, address occupation taxes, or waive the elimination period.

Most disability income policies include a waiver of premium after the insured has been disabled for:

• a.The entire benefit period
• b.At least 5 years
• c.A specified period such as 90 days, after which premiums are waived and often refunded back to the start of disability✓
• d.Immediately, from the very first day of any disability, with all premiums paid during that time refunded to the policyowner in full

DI waiver of premium usually starts after about 90 days of disability, then waives premiums and often refunds those paid during the waiting period. It is not immediate, nor delayed for years.

A disability income policy described as 'occupational' coverage pays benefits for disabilities that occur:

• a.Only while traveling for work
• b.Only while at work
• c.Only off the job
• d.Both on and off the job (24-hour coverage)✓

Occupational coverage is round-the-clock, paying for disabilities whether they arise on or off the job. Nonoccupational coverage, by contrast, excludes on-the-job losses that workers compensation handles.

Workers compensation covers work-related injuries, so a 'nonoccupational' disability policy is designed to cover:

• a.Only on-the-job injuries, coordinating directly with the employer's workers compensation coverage
• b.Both on- and off-the-job losses equally
• c.Off-the-job injuries and illnesses, to avoid overlapping with workers compensation✓
• d.Neither on- nor off-the-job losses

Nonoccupational coverage pays only for off-the-job disabilities, since on-the-job injuries are covered by workers compensation. This prevents duplicate coverage of work injuries.

An accident-only policy will NOT pay benefits for:

• a.A broken leg from a fall
• b.An injury from a car accident
• c.Accidental dismemberment
• d.Illness such as pneumonia or cancer✓

Accident-only coverage pays for injuries but excludes sickness, so an illness like pneumonia or cancer is not covered. Falls, car-accident injuries, and dismemberment are accidents and are covered.

A dread disease (critical illness) policy pays:

• a.Long-term custodial and nursing home care benefits for insureds who cannot perform their daily activities
• b.Benefits only for accidental injuries
• c.A benefit only for a specifically named condition such as cancer or heart attack✓
• d.Benefits for any illness the insured develops

A dread disease policy is a limited plan paying only when a named condition, like cancer or heart attack, is diagnosed. It does not cover all illnesses, accidents generally, or long-term care.

Skilled nursing care, intermediate care, and custodial care are:

• a.Levels of long-term care that an LTC policy may cover✓
• b.The parts of Medicare
• c.Types of hospital surgery
• d.Annuity payout options

These describe the levels of long-term care, from skilled medical care down to non-medical custodial help. They are not surgeries, Medicare parts, or annuity options.

Custodial care, the level most often needed long-term, primarily involves:

• a.Emergency surgical treatment and other acute medical procedures that must be performed by licensed physicians in a hospital setting
• b.Care by skilled medical professionals under a physician's order
• c.Help with activities of daily living, such as bathing, dressing, and eating, that can be provided by non-medical personnel✓
• d.Prescription drug therapy only

Custodial care is non-medical assistance with daily living activities and is what most long-term care recipients require. Skilled care under a doctor's order and surgery are different, higher levels of care.

In an LTC policy, choosing a longer elimination period will generally:

• a.Extend the total benefit period
• b.Eliminate the benefits entirely
• c.Increase the premium, because the insurer must begin paying benefits much sooner after care starts
• d.Lower the premium, because the insured self-funds care longer before benefits begin✓

A longer elimination period means the insured pays out of pocket longer before benefits start, so the premium is lower. It does not remove benefits or lengthen the benefit period.

Inflation protection in an LTC policy is important because:

• a.LTC premiums are guaranteed never to change
• b.Care costs tend to rise over time, so a fixed daily benefit loses value✓
• c.Medicare will pay any shortfall in benefits
• d.Long-term care benefits are always fully taxable, so inflation protection mainly helps offset the tax owed

Because long-term care costs climb over the years, a level daily benefit erodes in real value, so inflation protection preserves purchasing power. Medicare does not backstop custodial care.

A distinguishing feature of an HMO is that it:

• a.Reimburses the insured after the fact on a fee-for-service basis
• b.Provides prepaid care through network providers, emphasizing preventive services, usually with low copays✓
• c.Operates with no provider network at all
• d.Covers only inpatient hospital stays and provides no benefits for routine or preventive outpatient office visits

An HMO delivers prepaid, managed care through its network with an emphasis on prevention and low member cost-sharing. Fee-for-service reimbursement and no network describe indemnity plans.

In a PPO, using an out-of-network provider generally results in:

• a.Coverage at a higher out-of-pocket cost to the insured✓
• b.A cash bonus to the insured
• c.No coverage whatsoever
• d.The same cost as staying in-network

A PPO still covers out-of-network care but at a higher cost to the insured, preserving flexibility. It neither denies out-of-network care nor charges the same as in-network.

A Point-of-Service (POS) plan:

• a.Covers only emergency and urgent care services and provides no coverage at all for routine visits, whether they are in-network or out-of-network
• b.Never uses a primary care physician
• c.Blends HMO and PPO features, letting the member choose in-network (gatekeeper) or out-of-network care at the time of service✓
• d.Is identical to traditional indemnity coverage

A POS plan combines HMO gatekeeping for the lowest cost with the option to go out-of-network at higher cost, deciding at the point of service. It is not the same as indemnity coverage.