Texas Life & Health Insurance Exam — All Questions

A disability income policy uses an 'own-occupation' definition of total disability. This means the insured is considered totally disabled if, because of injury or sickness, they cannot:

• a.Perform the duties of any occupation for which they are reasonably suited
• b.Leave their home for any reason
• c.Perform the material duties of their own regular occupation✓
• d.Work in any job anywhere in the country

An own-occupation definition treats the insured as totally disabled when they cannot perform the important duties of their own regular occupation, even if they could work in some other job; it is the more generous (and thus more expensive) definition, favoring the insured. The 'any-occupation' definition, which is stricter, requires that the insured be unable to work in any job for which they are reasonably suited by education, training, or experience, and that is what the first and fourth options describe. Being unable to leave home is not part of either standard definition.

Benefits under most long-term care (LTC) insurance policies are typically triggered when the insured:

• a.Reaches a specified age such as 65
• b.Is unable to perform a specified number of the activities of daily living (ADLs) or has a severe cognitive impairment✓
• c.Is admitted to a hospital for any reason
• d.Loses their job

LTC benefits are usually triggered when the insured cannot perform a set number (commonly two) of the activities of daily living, such as bathing, dressing, eating, toileting, transferring, and continence, or suffers a severe cognitive impairment like Alzheimer's disease. Simply reaching an age does not trigger benefits. LTC is not the same as hospital coverage; it pays for custodial and long-term care such as nursing home or home care. Loss of employment is unrelated to LTC eligibility.

A key difference between a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO) is that an HMO typically:

• a.Requires members to use network providers and often a primary care physician who coordinates referrals✓
• b.Lets members see any provider out of network at the same cost as in network
• c.Reimburses members on a fee-for-service basis with no network at all
• d.Provides no coverage for preventive care

HMOs emphasize managed care: members generally must use in-network providers and often select a primary care physician (a gatekeeper) who coordinates care and referrals to specialists, in exchange for lower costs. A PPO offers more flexibility, allowing out-of-network care at a higher cost, so paying the same cost regardless of network is not accurate for either an HMO or a PPO. Fee-for-service with no network describes a traditional indemnity plan. HMOs actually stress preventive care, so the last option is wrong.

Once an insured's covered out-of-pocket expenses reach the plan's 'stop-loss' (out-of-pocket maximum) for the year, the plan generally:

• a.Stops paying any further claims for the year
• b.Requires the insured to pay 100% of remaining costs
• c.Cancels the policy until the next year
• d.Pays 100% of additional covered expenses for the rest of the year✓

The stop-loss (out-of-pocket maximum) provision caps the insured's annual cost sharing; once the insured has paid that amount in deductibles and coinsurance, the plan pays 100% of additional covered expenses for the remainder of the year, protecting the insured from catastrophic costs. It does not stop the plan's payments, nor shift all remaining costs to the insured, which are the opposite of its purpose. Reaching the stop-loss does not cancel the policy. The provision exists specifically to limit the insured's financial exposure.