Illinois Accident and Health Insurance
Ultimate Exam
**Question 1.** Which of the following best defines a *hazard* in risk
management?
A) The event that causes loss
B) The condition that increases the probability or severity of loss
C) The amount of loss incurred
D) The legal contract between insurer and insured
Answer: B
Explanation: A hazard is a condition that makes a loss more likely or more severe,
distinguishing it from a peril, which is the actual cause of loss.
**Question 2.** In an insurance contract, which characteristic means the parties
do not know the amount of loss when the contract is formed?
A) Aleatory
B) Adhesion
C) Unilateral
D) Conditional
Answer: A
Explanation: Aleatory contracts depend on uncertain events; the insurer’s
obligation is contingent upon the occurrence and size of a loss.
**Question 3.** Which element is NOT required for a risk to be insurable?
A) Predictability of loss
B) Catastrophic loss potential
C) Measurable loss amount
, Illinois Accident and Health Insurance
Ultimate Exam
D) Ability to transfer risk to a third party
Answer: D
Explanation: Insurability requires predictability, measurability, and that loss is not
catastrophic to the insurer; the ability to transfer is not an element of the risk
itself.
**Question 4.** A policy that pays a fixed amount per day for disability,
regardless of the insured’s earnings, is called:
A) Own-occupation disability insurance
B) Any-occupation disability insurance
C) Non-occupational disability insurance
D) Disability income insurance with benefit proportional to salary
Answer: D
Explanation: Disability income insurance typically provides a benefit based on a
percentage of pre-disability earnings, not a flat per-day amount.
**Question 5.** In a Major Medical policy, the *out-of-pocket limit* refers to:
A) The maximum deductible the insured must pay each year
B) The total amount the insurer will pay for all claims in a year
C) The maximum amount the insured must pay for covered services in a year,
after which the insurer pays 100%
D) The co-insurance percentage the insured pays after the deductible is met
Answer: C
Explanation: Once the insured’s expenses reach the out-of-pocket limit, the
insurer assumes full responsibility for additional covered expenses.
, Illinois Accident and Health Insurance
Ultimate Exam
**Question 6.** Which of the following is a mandatory uniform provision in all
Illinois health policies?
A) Change of occupation rider
B Misstatement of age rider
C) Grace period clause
D) Return of premium rider
Answer: C
Explanation: The grace period clause, which allows a limited time to pay overdue
premiums without loss of coverage, is required in all Illinois health policies.
**Question 7.** An HMO primarily controls costs by:
A) Allowing members to see any provider at any time
B) Requiring members to use a network of contracted providers and primary care
physicians for referrals
C) Paying providers a fee-for-service for each claim submitted
D) Offering unlimited coverage with no deductibles
Answer: B
Explanation: HMOs use a network and primary care physician referrals to manage
utilization and contain costs.
**Question 8.** The *principal sum* in an AD&D policy is:
A) The amount payable for accidental death only
B) The amount payable for each listed dismemberment loss, regardless of death
, Illinois Accident and Health Insurance
Ultimate Exam
C) The total maximum payable for any combination of death and dismemberment
benefits
D) The amount paid to the insurer for the policy premium
Answer: C
Explanation: The principal sum is the overall cap on benefits payable for any
combination of accidental death and dismemberment.
**Question 9.** A *non-cancellable* health policy means:
A) The insurer may cancel the policy for non-payment of premium only
B) The insurer cannot cancel the policy for any reason, and premiums cannot be
increased for any insured
C) The policy can be cancelled by the insured with 30 days’ notice
D) The insurer can increase premiums after the first renewal period
Answer: B
Explanation: Non-cancellable policies guarantee continuous coverage and fixed
premiums for the duration of the contract.
**Question 10.** Which of the following best describes the *free look* period?
A) Time during which the insurer can cancel the policy for misrepresentation
B) Period after policy delivery when the insured may examine the contract and
cancel without penalty
C) Time allowed for the insurer to investigate a claim before payment
D) Period for the insured to change the beneficiary designation
Answer: B
Ultimate Exam
**Question 1.** Which of the following best defines a *hazard* in risk
management?
A) The event that causes loss
B) The condition that increases the probability or severity of loss
C) The amount of loss incurred
D) The legal contract between insurer and insured
Answer: B
Explanation: A hazard is a condition that makes a loss more likely or more severe,
distinguishing it from a peril, which is the actual cause of loss.
**Question 2.** In an insurance contract, which characteristic means the parties
do not know the amount of loss when the contract is formed?
A) Aleatory
B) Adhesion
C) Unilateral
D) Conditional
Answer: A
Explanation: Aleatory contracts depend on uncertain events; the insurer’s
obligation is contingent upon the occurrence and size of a loss.
**Question 3.** Which element is NOT required for a risk to be insurable?
A) Predictability of loss
B) Catastrophic loss potential
C) Measurable loss amount
, Illinois Accident and Health Insurance
Ultimate Exam
D) Ability to transfer risk to a third party
Answer: D
Explanation: Insurability requires predictability, measurability, and that loss is not
catastrophic to the insurer; the ability to transfer is not an element of the risk
itself.
**Question 4.** A policy that pays a fixed amount per day for disability,
regardless of the insured’s earnings, is called:
A) Own-occupation disability insurance
B) Any-occupation disability insurance
C) Non-occupational disability insurance
D) Disability income insurance with benefit proportional to salary
Answer: D
Explanation: Disability income insurance typically provides a benefit based on a
percentage of pre-disability earnings, not a flat per-day amount.
**Question 5.** In a Major Medical policy, the *out-of-pocket limit* refers to:
A) The maximum deductible the insured must pay each year
B) The total amount the insurer will pay for all claims in a year
C) The maximum amount the insured must pay for covered services in a year,
after which the insurer pays 100%
D) The co-insurance percentage the insured pays after the deductible is met
Answer: C
Explanation: Once the insured’s expenses reach the out-of-pocket limit, the
insurer assumes full responsibility for additional covered expenses.
, Illinois Accident and Health Insurance
Ultimate Exam
**Question 6.** Which of the following is a mandatory uniform provision in all
Illinois health policies?
A) Change of occupation rider
B Misstatement of age rider
C) Grace period clause
D) Return of premium rider
Answer: C
Explanation: The grace period clause, which allows a limited time to pay overdue
premiums without loss of coverage, is required in all Illinois health policies.
**Question 7.** An HMO primarily controls costs by:
A) Allowing members to see any provider at any time
B) Requiring members to use a network of contracted providers and primary care
physicians for referrals
C) Paying providers a fee-for-service for each claim submitted
D) Offering unlimited coverage with no deductibles
Answer: B
Explanation: HMOs use a network and primary care physician referrals to manage
utilization and contain costs.
**Question 8.** The *principal sum* in an AD&D policy is:
A) The amount payable for accidental death only
B) The amount payable for each listed dismemberment loss, regardless of death
, Illinois Accident and Health Insurance
Ultimate Exam
C) The total maximum payable for any combination of death and dismemberment
benefits
D) The amount paid to the insurer for the policy premium
Answer: C
Explanation: The principal sum is the overall cap on benefits payable for any
combination of accidental death and dismemberment.
**Question 9.** A *non-cancellable* health policy means:
A) The insurer may cancel the policy for non-payment of premium only
B) The insurer cannot cancel the policy for any reason, and premiums cannot be
increased for any insured
C) The policy can be cancelled by the insured with 30 days’ notice
D) The insurer can increase premiums after the first renewal period
Answer: B
Explanation: Non-cancellable policies guarantee continuous coverage and fixed
premiums for the duration of the contract.
**Question 10.** Which of the following best describes the *free look* period?
A) Time during which the insurer can cancel the policy for misrepresentation
B) Period after policy delivery when the insured may examine the contract and
cancel without penalty
C) Time allowed for the insurer to investigate a claim before payment
D) Period for the insured to change the beneficiary designation
Answer: B
