Life License Qualification Program (LLQP) Practice Exam

What is a common characteristic of Major Medical policies?

1. Require payment of all medical costs immediately

2. Exempt from deductibles

3. Include coverage only for hospitalization

4. Often involve a deductible and coinsurance

The correct answer is: Often involve a deductible and coinsurance

Major Medical policies are designed to provide comprehensive coverage for a wide range of medical expenses, and a defining feature of these policies is that they often involve a deductible and coinsurance. A deductible is the amount that an insured must pay out-of-pocket before the insurance coverage starts to contribute to their medical costs. This feature helps to reduce the number of minor claims and associated administrative costs, which can help keep premiums more affordable. Coinsurance, on the other hand, is the percentage of costs that the insured is required to pay after the deductible is met, up to a certain limit. For example, after the insured meets their deductible, they might be responsible for paying 20% of the remaining costs while the insurance company covers the 80%. Together, these characteristics work to balance the sharing of costs between the insurer and the insured. This structure is what sets Major Medical policies apart from other types of insurance plans that might provide more limited or less comprehensive coverage. Other options do not represent common characteristics found in Major Medical policies. For instance, policies do not generally require the payment of all medical costs immediately, are typically not exempt from deductibles, and are not limited to covering hospitalization only. Instead, they cover a broader range of medical services