LIFE & HEALTH INSURANCE EXAM (2026 A+ GUIDE)
PREP – PRACTICE QUESTIONS & VERIFIED ANSWERS
Disability Income (DI)
Written specifically to cover accidents only or sickness only. These are usually short term
policies designed to provide income on a per diem basis. Any policy that provides a flat
dollar income benefit for each day of hospital confinement is referred to as a Hospital
Indemnity Plan.
Presumptive Disability
Provision that is found in most DI policies which specifies the conditions that will
automatically qualify the insured for full disability benefits. Some disability policies provide
a benefit when people simply meet certain qualifications, regardless of their disability to
work.
The Cost of Living Adjustment (COLA)
Rider will help protect against inflation.
Insured's monthly benefit will be increased automatically once payments have begun.
Generally, the first increase would be at the end of one year, and it would be followed by
annual increases for as long as the insured remains on the claim. Some of these Riders
provide for compound interest adjustments, while others provide simple interest
adjustments.
Future Increase Option, (FIO)
-Allows an insured to increase the benefit level up to a specific predetermined amount at
certain times or on certain occasions, without proof of insurability.
,-An increase may also be taken at one's marriage or birth of a child.
-In order to exercise this rider, the insured must qualify from an income standpoint to
prevent over insurance.
Garmented Insurability Rider
Future Increase Option or Guaranteed Purchase Option. This option is also available on the
life policies which allow the insured to purchase additional amounts of Disability Income
coverage without evidence of insurability (no medical exam).
Exclusions
-War and Military Service
-Intentionally self-inflicted injury, including attempted Suicide
-Standard Aviation Exclusions
-Losses occurring during the commission of a felony
-Private Pilot Exclusions and Exclusions related to hazardous hobbies (sky diving, Race Car
Driving etc.)
-Pre-existing condition limitations
-Impairment Riders (used to exclude specific named conditions from coverage)
Own Occupation
States that a disability occurs when a person cannot perform any of the regular duties a
person's own occupation is the most liberal to the insured. After 24 months it goes to Any
Occupation
,Any Occupation
Insured is qualified by reason of education, training or experience, is less liberal and may
be used when the policy provides for Total and Partial Disability coverage. Most policies are
any occupation because it is easier to justify the "any occupation" definition when agreeing
to issue a policy
Recurrent Disability
-Provision that specifies a period of time (usually 6 months) during which the reoccurrence
of a disability is considered to be a continuation of the prior claim. It addresses situations
when a claimant returns to work and is again disabled by the same cause.
Residual Disability
Occurs when a person is disabled then returns to work under the "Any Occupation"
provision and earns less than was promised by the Disability Income Policy.
Claim Settlement
DI claims must be paid no less frequently than on a monthly basis. Lump sum settlements
may be offered to a client, but a company may not coerce a client into accepting a lump
sum settlement.
Guaranteed Renewable (Class or Rate)
The policy must be renewed and may not be canceled or modified by the insurance
company to a stated date, usually age 65. The premium may not be increased unless all
members of the same class are increased.
, Non-cancelable policy
The premium may not be increased beyond what was originally expressed when the policy
was issued. Graded premiums are usually used with this type of policy.
DI Insurability
Only Disability Income Policies can be written as Guaranteed Renewable (G/R) and Non-
Cancelable.
Conditional Renewability
The company may renew the policy with changes that are stipulated in the policy
conditions. Premiums may be increased and coverage may be amended as long as those
conditions were included in the policy when it was issued.
Cancellable policies
Allow the insurer to cancel the policy at any time by providing a written notice. In this case,
all unearned premium must be returned on a prorate basis.
Optional Renewable
Extends the right of renewal to the insurer only. Not allowed in Insurance Industry. These
are phone in Cell Phone Contracts etc
Business Over Head Expense (BOE)
PREP – PRACTICE QUESTIONS & VERIFIED ANSWERS
Disability Income (DI)
Written specifically to cover accidents only or sickness only. These are usually short term
policies designed to provide income on a per diem basis. Any policy that provides a flat
dollar income benefit for each day of hospital confinement is referred to as a Hospital
Indemnity Plan.
Presumptive Disability
Provision that is found in most DI policies which specifies the conditions that will
automatically qualify the insured for full disability benefits. Some disability policies provide
a benefit when people simply meet certain qualifications, regardless of their disability to
work.
The Cost of Living Adjustment (COLA)
Rider will help protect against inflation.
Insured's monthly benefit will be increased automatically once payments have begun.
Generally, the first increase would be at the end of one year, and it would be followed by
annual increases for as long as the insured remains on the claim. Some of these Riders
provide for compound interest adjustments, while others provide simple interest
adjustments.
Future Increase Option, (FIO)
-Allows an insured to increase the benefit level up to a specific predetermined amount at
certain times or on certain occasions, without proof of insurability.
,-An increase may also be taken at one's marriage or birth of a child.
-In order to exercise this rider, the insured must qualify from an income standpoint to
prevent over insurance.
Garmented Insurability Rider
Future Increase Option or Guaranteed Purchase Option. This option is also available on the
life policies which allow the insured to purchase additional amounts of Disability Income
coverage without evidence of insurability (no medical exam).
Exclusions
-War and Military Service
-Intentionally self-inflicted injury, including attempted Suicide
-Standard Aviation Exclusions
-Losses occurring during the commission of a felony
-Private Pilot Exclusions and Exclusions related to hazardous hobbies (sky diving, Race Car
Driving etc.)
-Pre-existing condition limitations
-Impairment Riders (used to exclude specific named conditions from coverage)
Own Occupation
States that a disability occurs when a person cannot perform any of the regular duties a
person's own occupation is the most liberal to the insured. After 24 months it goes to Any
Occupation
,Any Occupation
Insured is qualified by reason of education, training or experience, is less liberal and may
be used when the policy provides for Total and Partial Disability coverage. Most policies are
any occupation because it is easier to justify the "any occupation" definition when agreeing
to issue a policy
Recurrent Disability
-Provision that specifies a period of time (usually 6 months) during which the reoccurrence
of a disability is considered to be a continuation of the prior claim. It addresses situations
when a claimant returns to work and is again disabled by the same cause.
Residual Disability
Occurs when a person is disabled then returns to work under the "Any Occupation"
provision and earns less than was promised by the Disability Income Policy.
Claim Settlement
DI claims must be paid no less frequently than on a monthly basis. Lump sum settlements
may be offered to a client, but a company may not coerce a client into accepting a lump
sum settlement.
Guaranteed Renewable (Class or Rate)
The policy must be renewed and may not be canceled or modified by the insurance
company to a stated date, usually age 65. The premium may not be increased unless all
members of the same class are increased.
, Non-cancelable policy
The premium may not be increased beyond what was originally expressed when the policy
was issued. Graded premiums are usually used with this type of policy.
DI Insurability
Only Disability Income Policies can be written as Guaranteed Renewable (G/R) and Non-
Cancelable.
Conditional Renewability
The company may renew the policy with changes that are stipulated in the policy
conditions. Premiums may be increased and coverage may be amended as long as those
conditions were included in the policy when it was issued.
Cancellable policies
Allow the insurer to cancel the policy at any time by providing a written notice. In this case,
all unearned premium must be returned on a prorate basis.
Optional Renewable
Extends the right of renewal to the insurer only. Not allowed in Insurance Industry. These
are phone in Cell Phone Contracts etc
Business Over Head Expense (BOE)
