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Other Health Insurance Concepts: Practice Questions

20 free practice questions with explanations. Pick an answer for each, then check your score.

Exam weight: 5 of 100 scored questions on the Life and Health general knowledge exam. Updated 2026-11-04.

Quick study guide

This short section collects health insurance ideas that cut across products: how disability is defined, who pays first when two plans cover the same claim, and how premiums and benefits are taxed.

Defining disability

Total disability is defined either as being unable to perform the duties of your own occupation (more generous) or of any occupation you are suited for by education, training or experience (stricter). Partial disability means you can do some, but not all, of your important job duties. Residual disability pays in proportion to the earnings you lose, which helps someone who returns to work part-time. A recurrent disability provision treats a relapse from the same cause within a set period as a continuation of the first claim, so no new elimination period applies.

Owners, beneficiaries and dependents

The policyowner can change a revocable beneficiary without the beneficiary's consent. In AD&D, the death benefit goes to the primary beneficiary (the contingent beneficiary only if the primary has died), while dismemberment benefits go to the insured. Plans that cover dependents must let children stay on until age 26, and coverage continues past the limiting age for a child who cannot support themselves because of a disability. Premiums can be paid annually, semiannually, quarterly or monthly; the more often you pay, the more you pay in total.

Coordination of benefits

When two group plans cover the same claim, the primary plan pays first and the secondary (excess) plan considers what is left, so total payments never exceed 100% of the allowable expense. Key NAIC order rules:

Situation	Primary plan
Person covered as an employee on one plan and as a dependent on another	The plan covering them as an employee
Child of married parents covered by both parents' plans	The plan of the parent whose birthday comes first in the calendar year
Active employee plan vs. retiree or laid-off plan	The active employee plan
One plan has no COB provision	That plan

Taxes

Individually paid disability income premiums are not deductible, and the benefits are tax-free. When an employer pays the disability premium, the employee does not pay tax on it, but the benefits are taxable income. Employer-paid medical coverage is tax-free to employees. Individuals may count medical insurance premiums as medical expenses, but only the part of total medical expenses above 7.5% of adjusted gross income is deductible.

Managed care, workers' comp and subrogation

Managed care controls costs with networks, primary care gatekeepers, preauthorization and utilization review. Workers' compensation covers job-related injury and illness regardless of fault, which is why many health and disability policies are nonoccupational (covering only off-the-job losses). Subrogation lets an insurer that paid a claim recover from the person who caused the loss.

Practice questions

A surgeon develops a hand tremor and can no longer operate, but she could earn a living teaching at a medical school. Under an own-occupation definition of total disability, she is:
1. A.Covered only if she also qualifies for Social Security disability.
2. B.Not disabled, because she could work in another job.
3. C.Totally disabled, because she cannot perform the duties of her own occupation.
4. D.Partially disabled, because she can still teach.
Show answer
Answer: C. An own-occupation definition asks only whether the insured can perform the main duties of her regular occupation, so a surgeon who cannot operate is totally disabled even if she could teach. Under a stricter any-occupation definition, she might not qualify, because she could work in another job suited to her education, training and experience. Own-occupation coverage costs more for that reason.
Source: Texas content outline VIII.A; NAIC Accident and Sickness Insurance Minimum Standards Model Regulation (Model 171), definition of total disability
An insured can still perform some, but not all, of the important duties of his occupation. Disability policies generally call this:
1. A.Partial disability
2. B.Presumptive disability
3. C.Recurrent disability
4. D.Total disability
Show answer
Answer: A. The NAIC minimum standards model defines partial disability as the inability to perform one or more, but not all, of the important duties of the insured's job, or by reference to time worked or pay. Total disability means being unable to work at all under the policy's definition. A recurrent disability is a relapse of an earlier disability.
Source: Texas content outline VIII.A; NAIC Accident and Sickness Insurance Minimum Standards Model Regulation (Model 171), definition of partial disability
After a period of total disability, an insured returns to work part-time and earns 40% less than before. Which benefit pays him an amount based on his lost earnings?
1. A.Accidental death benefit
2. B.Recurrent disability benefit
3. C.Waiver of premium
4. D.Residual disability benefit
Show answer
Answer: D. Residual disability benefits are tied to the insured's reduction in earnings, so they pay a proportion of the full benefit while the insured works at reduced capacity. Under the NAIC model a policy may require a qualification period of total disability before residual benefits start. A recurrent disability provision deals with a relapse, not with reduced earnings after returning to work.
Source: Texas content outline VIII.A; NAIC Accident and Sickness Insurance Minimum Standards Model Regulation (Model 171), definition of residual disability
An insured recovers from a back injury and returns to work. Two months later the same back condition disables him again. Under a typical recurrent disability provision:
1. A.The policy pays only a residual benefit based on his current earnings.
2. B.The relapse counts as a continuation of the first disability, with no new elimination period.
3. C.No benefits are payable, because the condition has already been claimed once.
4. D.He must satisfy a new elimination period before benefits start again.
Show answer
Answer: B. A recurrent disability provision treats a relapse from the same cause within a stated period after recovery as part of the original disability, so benefits resume without a new elimination period. The length of that period is stated in the policy; a relapse after it ends is treated as a new disability. A residual benefit relates to reduced earnings, not to a relapse.
Source: Texas content outline VIII.A; NAIC Accident and Sickness Insurance Minimum Standards Model Regulation (Model 171), recurrent disabilities
Under the NAIC uniform provisions for individual health policies, if the beneficiary designation is revocable, the insured may change the beneficiary:
1. A.Only once during the life of the policy.
2. B.Only with the written consent of the current beneficiary.
3. C.Without the consent of the current beneficiary.
4. D.Only on a policy anniversary date.
Show answer
Answer: C. The NAIC Uniform Individual Accident and Sickness Policy Provision Law reserves the right to change the beneficiary to the insured unless the insured has made an irrevocable designation, and the beneficiary's consent is not needed. An irrevocable beneficiary, by contrast, must agree to any change.
Source: Texas content outline VIII.B; NAIC Uniform Individual Accident and Sickness Policy Provision Law (Model 180), change of beneficiary
A child covered under a parent's individual health policy reaches the policy's limiting age but cannot support himself because of a physical disability and depends mainly on the parent. Under NAIC minimum standards, the child's coverage:
1. A.Continues, as long as the incapacity and dependency are proven.
2. B.Converts to a Medicare supplement policy.
3. C.Continues only if the child is a full-time student.
4. D.Ends automatically at the limiting age.
Show answer
Answer: A. The NAIC minimum standards model requires individual health policies to continue coverage for a dependent child who is incapable of self-sustaining employment because of a mental or physical disability and is chiefly dependent on the insured when the child reaches the limiting age. The insurer may ask for proof of the incapacity. Student status does not matter.
Source: Texas content outline VIII.C; NAIC Accident and Sickness Insurance Minimum Standards Model Regulation (Model 171), dependent child provision
A health plan offers coverage for dependent children. Under federal rules, a 24-year-old son can stay on his parent's plan:
1. A.Only if he is enrolled in college full-time.
2. B.Only if he is unmarried.
3. C.Only if he lives in his parent's home.
4. D.Even if he is married and is not claimed as a tax dependent.
Show answer
Answer: D. Plans that offer dependent coverage must let children stay on until they turn 26. They do not have to live at home, be in school or be claimed as a tax dependent, and married children can stay on, although their spouses and children cannot be added.
Source: Texas content outline VIII.C; HealthCare.gov: How to get or stay on a parent's plan; Texas Department of Insurance: Health care coverage guide
Under an individual accidental death and dismemberment policy, the insured loses a hand in a covered accident and survives. To whom is the dismemberment benefit paid?
1. A.The insured
2. B.The insured's estate
3. C.The primary beneficiary
4. D.The contingent beneficiary
Show answer
Answer: A. Under the NAIC uniform payment-of-claims provision, the benefit for loss of life is paid according to the beneficiary designation, and all other benefits are paid to the insured. A contingent beneficiary receives the death benefit only if the primary beneficiary has died first; if no beneficiary designation is in effect, the death benefit goes to the insured's estate.
Source: Texas content outline VIII.D; NAIC Uniform Individual Accident and Sickness Policy Provision Law (Model 180), payment of claims
For the same health or disability policy, which premium mode usually results in the lowest total cost over a year?
1. A.Semiannual
2. B.Monthly
3. C.Quarterly
4. D.Annual
Show answer
Answer: D. Paying once a year costs the least in total because the insurer has the money sooner and bills only once. Insurers add a charge for more frequent modes to cover extra billing costs and lost investment earnings, so twelve monthly payments add up to more than one annual premium.
Source: Texas content outline VIII.E
What is the main purpose of a coordination of benefits provision in group health plans?
1. A.To guarantee that each plan pays its full benefit regardless of other coverage
2. B.To set the order in which plans pay so that total benefits do not exceed the allowable expense
3. C.To let an insured collect more than the cost of care when covered by two plans
4. D.To transfer the insured's right to sue an at-fault party to the insurer
Show answer
Answer: B. The NAIC Coordination of Benefits Model Regulation sets a uniform order of benefit determination and lets secondary plans reduce their payments so that combined benefits do not exceed 100% of the allowable expense. That prevents the insured from profiting from duplicate coverage. Transferring the right to sue a third party is subrogation.
Source: Texas content outline VIII.F; NAIC Coordination of Benefits Model Regulation (Model 120); HealthCare.gov glossary: Coordination of benefits
A wife is covered as an employee under her own group health plan and as a dependent under her husband's group plan. Neither plan involves Medicare. Under the NAIC coordination of benefits rules, which plan pays first for her claims?
1. A.Her own employer's plan, because it covers her as an employee
2. B.Whichever plan has the lower deductible
3. C.Her husband's plan, because it is the family plan
4. D.Each plan pays half of every claim
Show answer
Answer: A. Under the NAIC model, the plan that covers a person other than as a dependent (for example, as an employee) is primary, and the plan that covers the person as a dependent is secondary. Deductible size and which plan is called a family plan do not decide the order.
Source: Texas content outline VIII.F; NAIC Coordination of Benefits Model Regulation (Model 120), non-dependent or dependent rule
A child is covered under both parents' group health plans. The parents are married; the mother's birthday is March 10 and the father's is January 25, and the father is older. Under the NAIC birthday rule, which plan is primary for the child?
1. A.The father's plan, because his birthday falls earlier in the calendar year
2. B.The mother's plan, because mothers' plans are always primary
3. C.The mother's plan, because she is younger
4. D.The plan that has the lower premium
Show answer
Answer: A. For a child whose parents are married or living together, the NAIC birthday rule makes the plan of the parent whose birthday (month and day) comes first in the calendar year primary. The parents' ages and birth years do not matter. If both share a birthday, the plan that has covered a parent longer is primary.
Source: Texas content outline VIII.F; NAIC Coordination of Benefits Model Regulation (Model 120), dependent child rules
Under the NAIC coordination of benefits rules, a group health plan that contains no coordination of benefits provision is generally:
1. A.Exempt from paying any claim the other plan covers
2. B.Always the secondary plan
3. C.Always the primary plan
4. D.Allowed to pay only 50% of each claim
Show answer
Answer: C. The NAIC model says a plan without order-of-benefit provisions consistent with the regulation is always primary, which stops a plan from avoiding its share simply by leaving COB rules out. No plan may say its benefits are always excess or always secondary except as the regulation allows.
Source: Texas content outline VIII.F; NAIC Coordination of Benefits Model Regulation (Model 120), section 6B
A disability income policy that covers only injuries and sicknesses that do not arise from the insured's job is called:
1. A.Business overhead coverage
2. B.Nonoccupational coverage
3. C.Occupational coverage
4. D.Key employee coverage
Show answer
Answer: B. Nonoccupational coverage pays only for off-the-job injury and illness, because work-related losses are expected to be covered by workers' compensation. Occupational coverage pays for losses both on and off the job. The NAIC minimum standards model allows the definition of injury to exclude injuries covered by workers' compensation or that occur while working for pay.
Source: Texas content outline VIII.G; NAIC Accident and Sickness Insurance Minimum Standards Model Regulation (Model 171), definition of injury
An insured buys an individual disability income policy and pays the premiums herself with after-tax dollars. For federal income tax purposes:
1. A.The premiums are not deductible, and the benefits are not taxable.
2. B.The premiums are deductible as a medical expense, and the benefits are taxable.
3. C.The premiums are deductible, and the benefits are not taxable.
4. D.The premiums are not deductible, and the benefits are taxable.
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Answer: A. The IRS says that if you pay the entire cost of an accident or health plan, benefits you receive for personal injury or sickness are not income. Premiums for policies that pay for loss of earnings cannot be counted as medical expenses. The trade-off is simple: no deduction going in, no tax coming out.
Source: Texas content outline VIII.H; IRS Publication 525: Sickness and injury benefits; IRS Publication 502: Insurance premiums you can't include
An employer pays the entire premium for a group long-term disability plan, and the premiums are not included in employees' income. If an employee becomes disabled, the benefits are:
1. A.Tax-free for the first two years only
2. B.Taxable to the employer, not the employee
3. C.Taxable as income to the employee
4. D.Tax-free, because the employee never paid for the coverage
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Answer: C. Benefits from an accident or health plan paid for by the employer are generally taxable income to the employee. If the employee and employer share the cost, only the part of the benefit attributable to the employer's payments is taxable. Benefits are tax-free only to the extent the employee paid the premiums with after-tax money.
Source: Texas content outline VIII.H; IRS Publication 525: Sickness and injury benefits; 26 U.S.C. § 105(a)
An employer pays the full premium for its employees' group medical expense coverage. For federal income tax purposes:
1. A.Employees must pay income tax on any medical bills the plan reimburses.
2. B.The employer may not deduct the premium as a business expense.
3. C.The employer-paid premium is added to each employee's taxable wages.
4. D.Employees owe no tax on the coverage, and medical reimbursements are generally tax-free.
Show answer
Answer: D. Federal law excludes employer-provided coverage under an accident or health plan from an employee's gross income, and amounts paid to reimburse an employee's medical care are generally excluded too. The IRS also lets a business deduct premiums for group hospitalization and medical insurance for employees.
Source: Texas content outline VIII.H; 26 U.S.C. § 106(a); 26 U.S.C. § 105(b); IRS Publication 334: Insurance
A health plan reviews a request for a planned surgery to decide, before it happens, whether the surgery is medically necessary. This managed care technique is called:
1. A.Coordination of benefits
2. B.Utilization review (preauthorization)
3. C.Subrogation
4. D.Coinsurance
Show answer
Answer: B. Utilization review is a process HMOs and insurers use to cut costs by checking, case by case, whether requested treatment is necessary; reviewing before treatment is often called preauthorization or prior approval. If the member skips a required approval, the plan might not pay. Subrogation and coordination of benefits deal with other parties' responsibility for a claim.
Source: Texas content outline VIII.I; Texas Department of Insurance: Health and life insurance glossary; Texas Department of Insurance: Health care coverage guide
Which statement about workers' compensation is true?
1. A.It covers job-related injuries regardless of fault, but its cash benefits are fully taxable.
2. B.It pays only when the employer was at fault, and benefits shrink by the worker's share of blame.
3. C.It covers only off-the-job injuries, and benefits are paid through the worker's health plan.
4. D.It covers job-related injury and illness regardless of fault, and benefits are generally tax-free.
Show answer
Answer: D. Workers' compensation, set by state law, covers employees' job-related injuries and diseases regardless of fault. The IRS says amounts received as workers' compensation for an occupational sickness or injury are fully exempt from tax. Because job-related losses are handled this way, many health and disability policies exclude them.
Source: Texas content outline VIII.J; IRS Publication 334: Insurance (workers' compensation); IRS Publication 525: Workers' compensation
A health insurer pays an insured's hospital bills after a car crash caused by another driver, then seeks repayment from the at-fault driver. The insurer's right to do this is called:
1. A.Assignment
2. B.Coordination of benefits
3. C.Subrogation
4. D.Indemnity
Show answer
Answer: C. Subrogation is the transfer to the insurer of the insured's right to recover from the person who caused the loss, once the insurer has paid. It keeps the insured from collecting twice and puts the cost on the party at fault. Coordination of benefits splits a claim between two health plans, and an assignment transfers policy rights or benefits by agreement.
Source: Texas content outline VIII.K; Cornell LII Wex: Subrogation

Where these questions come from: Texas content outline (Pearson VUE #124401, effective 1 Sep 2026), Life and Health general knowledge, section VIII: Other Insurance Concepts — 5 of 100 scored questions. See how we write questions.