Life & Health · Lesson directory

PEOPLE & POLICY BASICS · T007–T010

Policy Basics

Separate the price of insurance, the written contract, the protection it provides, and the benefits payable.

4 terms · Three practice questions for each term

CARD T007

Premium

A premium is the price paid for insurance coverage.

How it works

Premiums may be paid periodically or as a single payment, depending on the contract. In health insurance, a premium is separate from a deductible, copayment, or coinsurance owed for care. Paying a premium does not make every service covered. Missing a payment may affect coverage, but grace periods and other applicable provisions must be considered before concluding that a policy has lapsed. [1] [2]

EXAMPLE

A worker pays a $180 monthly health premium and later owes a $25 copayment for a covered visit. The $180 buys coverage; the $25 is the worker’s share of that service.

Key distinction

Keep the cost of maintaining coverage separate from the cost of using covered services.

Practice Premium · 3 questions

CARD T008

Policy

A policy is the written insurance contract describing coverage and the parties’ obligations.

How it works

Read the policy together with its attached riders and other documents made part of the contract. A summary or sales illustration can be useful, but it is not a substitute for the contract’s actual terms. Distinguish the application requesting insurance from the issued policy setting out the coverage. For life insurance, the entire-contract provision explains which documents form the agreement. [1] [3]

EXAMPLE

A brochure describes a broad product feature. The issued policy and attached rider specify the benefit trigger and limits. Those contract provisions are needed to evaluate a claim.

Key distinction

A policy is the agreement; coverage is the protection it provides. A claim is a request under that agreement.

Practice Policy · 3 questions

CARD T009

Coverage

Coverage is the protection a policy provides within its terms.

How it works

To evaluate coverage, identify the covered person, the event or service, when protection is in force, and any relevant exclusions or conditions. Then determine the payable amount. A service can be covered while still subject to a deductible or coinsurance. A limit controls the amount of protection; an exclusion removes a specified item from it. [1] [3]

EXAMPLE

A health plan covers a particular hospital service, but the patient still owes deductible and coinsurance amounts. Having coverage does not mean the insurer pays the entire bill.

Key distinction

“Covered” and “paid in full” are not synonyms.

Practice Coverage · 3 questions

CARD T010

Benefit

A benefit is a payment or service provided when the policy’s requirements are met.

How it works

The form of the benefit depends on the product. Life insurance may pay death proceeds; disability income insurance may pay a periodic income benefit; health insurance may pay toward covered care. A stated benefit amount is not a promise to pay for every event. Eligibility, triggers, limits, and other applicable provisions determine the benefit payable. [1] [2]

EXAMPLE

A disability policy pays a monthly amount after its disability definition and waiting-period requirements are satisfied. That payment is the benefit; the premium is what was paid for the protection.

Key distinction

Separate the benefit from the claim requesting it and from the premium paid for coverage.

Practice Benefit · 3 questions

APPLY THE TERMS

Practice questions

Select an answer, then check it to see why each option is right or wrong.

T007 · Premium

0 of 3 answered

QUESTION 1 OF 3A policy requires $60 each month to maintain coverage. The $60 is a:
QUESTION 2 OF 3Which statement distinguishes a health premium from a copayment?
QUESTION 3 OF 3A premium is overdue. What is the best first consideration before saying coverage ended?

T008 · Policy

0 of 3 answered

QUESTION 1 OF 3Which item is the written insurance contract?
QUESTION 2 OF 3An attached rider modifies a policy benefit. How should it be read?
QUESTION 3 OF 3Which distinction is correct?

T009 · Coverage

0 of 3 answered

QUESTION 1 OF 3A covered health service is subject to coinsurance. Which statement is correct?
QUESTION 2 OF 3Which question addresses the scope of coverage?
QUESTION 3 OF 3How does an exclusion differ from a benefit limit?

T010 · Benefit

0 of 3 answered

QUESTION 1 OF 3An insurer pays the beneficiary after a covered death. The payment is a:
QUESTION 2 OF 3Which is an example of a disability income benefit?
QUESTION 3 OF 3A policy lists a benefit amount. What else matters when deciding whether it is payable?

Sources & further reading

Original explanations and practice scenarios informed by the following regulator resources. State examples are not presented as nationwide deadlines or requirements.