Chapter 1: Health And Accident Insurance

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Chapter 1: Health And Accident Insurance - Quiz

South Carolina Pre-licensing Education - Life and Health Insurance


Questions and Answers
  • 1. 

    Ron has a new employer and wishes to enroll in the company's group health plan. In determining whether his pre-existing health condition applies, Ron cannot have more than a (blank) day gap without previous health insurance.

    • A.

      45

    • B.

      63

    • C.

      75

    • D.

      90

    Correct Answer
    B. 63
    Explanation
    In order for Ron's pre-existing health condition to apply, he cannot have more than a 63-day gap without previous health insurance. This means that if Ron had a gap of 64 days or more without health insurance, his pre-existing condition would not be covered under the company's group health plan. The 63-day limit ensures that individuals maintain continuous coverage and prevents them from waiting until they have a health issue before obtaining insurance.

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  • 2. 

    Group health plans may deny participation based upon the

    • A.

      Member's claims history

    • B.

      Member's current age

    • C.

      Member's pre-existing condition

    • D.

      Member' part-time employment status

    Correct Answer
    D. Member' part-time employment status
    Explanation
    Group health plans may deny participation based on various factors, including the member's claims history, current age, pre-existing condition, and part-time employment status. In this case, the correct answer is "Member's part-time employment status." This means that individuals who work part-time may be denied participation in the group health plan. The reason behind this could be that part-time employees may not meet the eligibility requirements set by the plan or may not be considered as eligible employees under the plan's terms.

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  • 3. 

    How many employees must an employer have for a terminated employee to be eligible for COBRA?

    • A.

      20

    • B.

      30

    • C.

      40

    • D.

      50

    Correct Answer
    A. 20
    Explanation
    An employer must have at least 20 employees for a terminated employee to be eligible for COBRA. COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that allows employees and their dependents to continue their health insurance coverage after job loss or other qualifying events. The 20-employee threshold ensures that smaller businesses are not burdened with the requirement to offer COBRA benefits.

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  • 4. 

    Without a Section 125 Plan in place, what would happen to an employee's payroll contribution to an HSA?

    • A.

      It would be considered taxable income to the employee

    • B.

      The employee would not be allowed to an HSA

    • C.

      The employer would pay payroll tax and FICA on the contribution amount

    • D.

      The employer would not be allowed to deduct the contribution from the employee's pay

    Correct Answer
    A. It would be considered taxable income to the employee
    Explanation
    Without a Section 125 Plan in place, an employee's payroll contribution to an HSA would be considered taxable income to the employee. This means that the amount contributed to the HSA would be subject to income tax, reducing the employee's take-home pay.

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  • 5. 

    Sonya applied for a health insurance policy on April 1. Her agent submitted the information to the insurance company on April 6. She paid the premium on May 15 with the policy indicating the effective date being May 30. On which date would Sonya have coverage?

    • A.

      April 1

    • B.

      April 6

    • C.

      May 15

    • D.

      May 30

    Correct Answer
    D. May 30
    Explanation
    Sonya would have coverage starting from May 30. This is because the effective date of the policy is May 30, as stated in the question. The fact that she applied for the policy on April 1, the agent submitted the information on April 6, and she paid the premium on May 15 are all irrelevant to determining the coverage start date. The effective date specified in the policy is the key factor in determining when the coverage begins.

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  • 6. 

    Credit Accident and Health plans are designed to

    • A.

      Permit creditors the ability to require that coverage be purchased through insurers of their choice

    • B.

      Provide permanent protection

    • C.

      Help pay off existing loans during periods of disability

    • D.

      Not permit free choice of coverage selection

    Correct Answer
    C. Help pay off existing loans during periods of disability
    Explanation
    Credit Accident and Health plans are specifically designed to assist individuals in paying off their existing loans in the event of disability. These plans provide financial support during periods of disability, ensuring that loan payments are still made even when the individual is unable to work. This helps to alleviate the financial burden on the individual and ensures that their loans are not left unpaid. These plans do not offer the option for individuals to freely choose their coverage; rather, they are typically required by creditors in order to protect their loans.

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  • 7. 

    What is the contract called that is issued to an employer for a Group Medical Insurance Plan?

    • A.

      Master policy

    • B.

      Certificate of coverage

    • C.

      Provisional policy

    • D.

      Document of coverage

    Correct Answer
    A. Master policy
    Explanation
    A master policy is the contract that is issued to an employer for a Group Medical Insurance Plan. This policy outlines the terms and conditions of the insurance coverage provided to the employees. It serves as the legal agreement between the insurance company and the employer, detailing the coverage limits, premiums, and any exclusions or limitations. The master policy is typically held by the employer, who then provides certificates of coverage to individual employees as proof of their insurance.

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  • 8. 

    Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a terminated employee's benefits must

    • A.

      Be less extensive and premium cannot exceed 102%

    • B.

      Be the same and the premium cannot exceed 102%

    • C.

      Be more extensive and the premium cannot exceed 102%

    • D.

      Be the same as well as the premium

    Correct Answer
    B. Be the same and the premium cannot exceed 102%
    Explanation
    Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a terminated employee's benefits must be the same as before their termination, meaning they should receive the same level of coverage. However, the premium for these benefits cannot exceed 102% of the cost of the plan. This ensures that terminated employees have access to the same benefits they had while employed, but at a slightly higher cost to account for the fact that they are no longer part of a group plan.

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  • 9. 

    Which of the following would evidence ownership in a participating health insurance contract?

    • A.

      Stock ownership

    • B.

      Irrevocable beneficiary status

    • C.

      Policy ownership

    • D.

      Collateral assignment

    Correct Answer
    C. Policy ownership
    Explanation
    Policy ownership would evidence ownership in a participating health insurance contract. When an individual owns a policy, they have the rights and responsibilities associated with that contract. They have the authority to make changes to the policy, such as adding or removing beneficiaries, and they are entitled to the benefits provided by the policy. Policy ownership provides proof of ownership and control over the insurance contract.

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  • 10. 

    An employer is issued a group medical insurance policy. This single contract is known as a(n)

    • A.

      Entire contract

    • B.

      Master policy

    • C.

      Certificate of coverage

    • D.

      Employer contract

    Correct Answer
    B. Master policy
    Explanation
    A group medical insurance policy issued to an employer is called a master policy. This is because it covers a group of individuals, typically employees of the same company, under a single contract. The master policy outlines the terms and conditions of the insurance coverage provided to the group, including the benefits, premiums, and any exclusions or limitations. The employer then typically provides certificates of coverage to each employee, which serve as proof of their individual coverage under the master policy.

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  • 11. 

    Under group health insurance, a certificate of coverage is issued to the

    • A.

      Employer

    • B.

      Employee

    • C.

      Producer

    • D.

      Sponsor

    Correct Answer
    B. Employee
    Explanation
    A certificate of coverage is issued to the employee under group health insurance. This document provides details about the employee's health insurance coverage, including the benefits, limitations, and terms of the policy. It serves as proof of insurance and helps the employee understand their rights and responsibilities regarding their health coverage. The employer typically arranges for the group health insurance plan and may receive a separate document or contract outlining the terms of the policy, but the certificate of coverage is specifically issued to the employee.

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  • 12. 

    Under a disability income policy, which provision would be payable if the cause of an injury is unexpected and accidental?

    • A.

      Presumptive disability provision

    • B.

      Absolute accidental provision

    • C.

      Accidental death benefit provision

    • D.

      Accidental bodily injury provision

    Correct Answer
    D. Accidental bodily injury provision
    Explanation
    The accidental bodily injury provision would be payable if the cause of an injury is unexpected and accidental. This provision covers any bodily injury that is caused by an accident, regardless of the severity or permanence of the disability. It ensures that the policyholder receives financial compensation for medical expenses and loss of income resulting from the accidental injury.

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  • 13. 

    Health insurance involves two perils, accident and (blank).

    • A.

      Death

    • B.

      Sickness

    • C.

      Disability

    • D.

      Liability

    Correct Answer
    B. Sickness
    Explanation
    Health insurance involves two perils, accident and sickness. Accident refers to unexpected events that cause physical harm, while sickness refers to illnesses or diseases that affect a person's health. Therefore, the correct answer is sickness, as it completes the two perils covered by health insurance.

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  • 14. 

    Health insurance will typically cover which of the following perils?

    • A.

      Death due to illness

    • B.

      Injury due to accident

    • C.

      Death due to accident

    • D.

      Dismemberment

    Correct Answer
    B. Injury due to accident
    Explanation
    Health insurance typically covers injuries due to accidents. This means that if a person sustains an injury as a result of an accident, their health insurance policy will provide coverage for the medical expenses associated with treating that injury. This coverage can include hospitalization, surgeries, medications, and rehabilitation services. However, health insurance may not cover death due to accidents or illnesses, as these scenarios may fall under life insurance or other types of coverage. Dismemberment, which refers to the loss or impairment of a body part, may also be covered by health insurance depending on the policy.

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  • 15. 

    Which of the following does Coordination of Benefits allow?

    • A.

      Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid

    • B.

      Allows both a group health plan and individual health plan to coordinate their benefit payments

    • C.

      Allows the deductible to be spread out between all the health providers

    • D.

      Allows each health provider to pay 100% of the claim

    Correct Answer
    A. Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paid
    Explanation
    Coordination of Benefits allows the secondary payor to reduce their benefit payments so that the total amount paid for the claim does not exceed 100%. This means that if a person has multiple health insurance policies, the secondary payor will coordinate with the primary payor to ensure that the total amount paid for the claim does not exceed the actual expenses incurred. This helps prevent overpayment and ensures that the claim is not paid more than the actual cost of the medical services received.

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  • 16. 

    The purpose of the Coordination of Benefits provision in group accident and health plans is to

    • A.

      Avoid overpayment of claims

    • B.

      Reduce out-of-pocket costs

    • C.

      Reduce adverse selection

    • D.

      Lower the cost of premiums

    Correct Answer
    A. Avoid overpayment of claims
    Explanation
    The purpose of the Coordination of Benefits provision in group accident and health plans is to avoid overpayment of claims. This provision ensures that multiple insurance policies do not pay more than the total amount of the claim, preventing duplication of benefits and unnecessary expenses. By coordinating benefits, the insurance companies can determine the primary and secondary coverage, ensuring that claims are paid accurately and efficiently, without overpaying for the same expenses. This helps in controlling costs and maintaining the financial stability of the insurance plans.

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  • 17. 

    Sole proprietors are permitted tax deductions for health costs paid from their earnings in the amount of

    • A.

      Costs that exceed 7 1/2 % of AGI

    • B.

      Costs that exceed 10% of AGI

    • C.

      100% of costs

    • D.

      No deduction permitted

    Correct Answer
    C. 100% of costs
    Explanation
    Sole proprietors are permitted tax deductions for health costs paid from their earnings in the amount of 100% of costs. This means that sole proprietors can deduct the full amount of their health costs from their earnings when calculating their taxable income. This can help reduce their overall tax liability and provide some relief for the expenses incurred for healthcare.

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  • 18. 

    A person covered with an individual health plan

    • A.

      Is issued a policy

    • B.

      Is issued a certificate of medical costs

    • C.

      Does not contract directly with the insurance company

    • D.

      Is not subject to medical underwriting

    Correct Answer
    A. Is issued a policy
    Explanation
    The correct answer is "Is issued a policy." This means that when a person is covered with an individual health plan, they are given a policy by the insurance company. This policy outlines the terms and conditions of their coverage, including the benefits, limitations, and exclusions. It serves as a legal contract between the insured person and the insurance company, detailing their rights and responsibilities.

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  • 19. 

    According to HIPAA, when an insured individual leaves an employer and immediately begins working for a new company that offers group health insurance, the individual

    • A.

      Is eligible for coverage upon hire

    • B.

      Must wait 360 days to be eligible for coverage

    • C.

      Must continue coverage with the previous employer

    • D.

      Is eligible for only health insurance, not life or dental insurance

    Correct Answer
    A. Is eligible for coverage upon hire
    Explanation
    According to HIPAA, when an insured individual leaves an employer and immediately begins working for a new company that offers group health insurance, the individual is eligible for coverage upon hire. This means that they do not have to wait for a certain period of time to be eligible for health insurance coverage with the new employer.

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  • 20. 

    When can a group health policy renewal be denied according to the Health Insurance Portability and Accountability Act (HIPAA)?

    • A.

      When a change of management has occurred within the group

    • B.

      When the annual number of claims has increased by 25%

    • C.

      When contribution or participation rules have been violated

    • D.

      When group participation has increased by 25%

    Correct Answer
    A. When a change of management has occurred within the group
    Explanation
    According to the Health Insurance Portability and Accountability Act (HIPAA), a group health policy renewal can be denied when a change of management has occurred within the group. This means that if there has been a change in the leadership or administration of the group, the insurance company has the right to deny the renewal of the policy. This could be due to various reasons such as a change in the group's financial stability or a change in the group's risk profile.

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  • 21. 

    An insurer has the right to recover payment made to the insured from the negligent party. These rights are called

    • A.

      Contributory

    • B.

      Indemnity

    • C.

      Estoppel

    • D.

      Subrogation

    Correct Answer
    D. Subrogation
    Explanation
    Subrogation is the correct answer because it refers to the insurer's right to recover the payment made to the insured from the negligent party. In other words, when the insurer compensates the insured for a loss, they can then step into the insured's shoes and pursue legal action against the responsible party in order to recover the amount paid out. This allows the insurer to mitigate their losses and hold the negligent party accountable for their actions.

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  • 22. 

    Which of the following decisions would a Health Savings Account (HSA)owner NOT be able to make?

    • A.

      The amount contributed by the employer

    • B.

      The amount contributed by the owner

    • C.

      The underlying account investments used

    • D.

      The medical expenses paid for by the HSA

    Correct Answer
    A. The amount contributed by the employer
    Explanation
    A Health Savings Account (HSA) owner would not be able to make decisions regarding the amount contributed by the employer. This is because the employer determines the amount they contribute to the HSA, and the owner does not have control over this decision. The owner, however, can make decisions regarding the amount they contribute to the HSA, the underlying account investments used, and the medical expenses paid for by the HSA.

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  • 23. 

    In an employer-sponsored group accident and health plan, a master contract is issued to the

    • A.

      TPA

    • B.

      Employees

    • C.

      Adminstrative Services Organization

    • D.

      Employer

    Correct Answer
    D. Employer
    Explanation
    In an employer-sponsored group accident and health plan, the master contract is issued to the employer. This means that the employer is responsible for providing and managing the insurance coverage for their employees. The employer enters into a contract with an insurance company to provide coverage for their employees, and they are the ones who hold the master contract. The employer may work with a Third Party Administrator (TPA) or an Administrative Services Organization (ASO) to help administer the plan, but the ultimate contract holder is the employer.

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  • 24. 

    In an employer-sponsored contributory group Disability Income plan, the employer pays 60% of the premium and each employee pays 40% of the premium. Any income benefits paid are taxed to the employee at

    • A.

      Employee has no tax liability

    • B.

      40% of the benefit

    • C.

      60% of the benefit

    • D.

      100% of the benefit

    Correct Answer
    C. 60% of the benefit
    Explanation
    In an employer-sponsored contributory group Disability Income plan, the employer pays 60% of the premium and each employee pays 40% of the premium. Therefore, it is logical that the employee would be taxed on 60% of the benefit, as the employer is covering 60% of the premium. This means that 60% of the benefit received by the employee would be subject to taxation.

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  • 25. 

    A common exclusion with Vision plans is

    • A.

      Eyeglass frames

    • B.

      The examination

    • C.

      Contact lenses

    • D.

      Lasik surgery

    Correct Answer
    D. Lasik surgery
    Explanation
    A common exclusion with Vision plans is Lasik surgery. This means that most Vision plans do not cover the cost of Lasik surgery, which is a type of refractive surgery used to correct vision problems such as nearsightedness, farsightedness, and astigmatism. Therefore, if someone has a Vision plan and wants to undergo Lasik surgery, they would likely have to pay for the procedure out of pocket.

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  • 26. 

    Which of the following is typically NOT eligible for coverage in a group health policy?

    • A.

      Full-time employee

    • B.

      Temporary employee

    • C.

      Business owner

    • D.

      Partner in a partnership

    Correct Answer
    B. Temporary employee
    Explanation
    Temporary employees are typically not eligible for coverage in a group health policy because they are not considered full-time employees and may not meet the eligibility criteria set by the insurance provider. Group health policies are usually designed to cover full-time employees who work a certain number of hours per week or month. Temporary employees are often hired for a specific project or for a limited period of time, and their employment status may not meet the requirements for coverage under the group health policy.

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  • 27. 

    Which of the following is INELIGIBLE to participate in a Section 125 Plan?

    • A.

      Key Employee in a C-Corp

    • B.

      Highly Compensated Employee in an S-Corp

    • C.

      An C-Corp Owner with a greater than 2% share

    • D.

      An S-Corp Owner with a greater than 2% share

    Correct Answer
    D. An S-Corp Owner with a greater than 2% share
    Explanation
    An S-Corp Owner with a greater than 2% share is ineligible to participate in a Section 125 Plan because Section 125 Plans, also known as cafeteria plans, are designed for employees to choose from a variety of pre-tax benefits. However, S-Corp owners with a greater than 2% share are considered self-employed individuals and not employees. Therefore, they do not qualify for participation in the Section 125 Plan.

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  • 28. 

    Key Person Disability Insurance pays benefits to the

    • A.

      Hospital

    • B.

      Employee

    • C.

      Employer

    • D.

      Employee's creditors

    Correct Answer
    C. Employer
    Explanation
    Key Person Disability Insurance is a type of insurance policy that provides financial protection to a company or employer in the event that a key employee becomes disabled and is unable to work. This insurance policy pays benefits to the employer, helping them cover the costs associated with hiring a replacement or managing the business during the disabled employee's absence. By receiving these benefits, the employer can ensure the smooth operation of the business and mitigate any potential financial losses caused by the disability.

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  • 29. 

    Justin is receiving disability income benefits from a group policy paid for by his employer. How are these benefits treated for tax purposes?

    • A.

      Partially taxable income

    • B.

      Non-taxable income

    • C.

      Taxable income

    • D.

      Conditionally taxable income

    Correct Answer
    C. Taxable income
    Explanation
    The benefits received by Justin from his employer's group policy are considered taxable income for tax purposes. This means that Justin will have to report these benefits as income on his tax return and may be required to pay taxes on them.

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  • 30. 

    The limited period of time given to all members to sign up for a group health plan is called the

    • A.

      Enlistment period

    • B.

      Sign-up period

    • C.

      Probationary period

    • D.

      Enrollment period

    Correct Answer
    D. Enrollment period
    Explanation
    The correct answer is "Enrollment period". This is the specific timeframe during which all members are allowed to sign up for a group health plan. It is a limited period of time designated for individuals to enroll and become part of the plan. The term "enrollment" refers to the act of joining or registering for something, in this case, a group health plan.

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  • 31. 

    Mark continues working after the age of 65 and is covered through his employer's group health plan. Which of the following statements is TRUE?

    • A.

      He's not eligible for Medicare

    • B.

      His group health plan and Medicare pay 50/50

    • C.

      Medicare is the secondary payer

    • D.

      Medicare is the primary payer

    Correct Answer
    C. Medicare is the secondary payer
    Explanation
    Since Mark continues working after the age of 65 and is covered through his employer's group health plan, Medicare becomes the secondary payer. This means that Mark's group health plan will be the primary payer, and Medicare will only cover costs that are not covered by the group health plan.

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  • 32. 

    Which of the following would be considered a possible applicant and contract policyholder for group health benefits?

    • A.

      Human resource department

    • B.

      Employer

    • C.

      Insured employee

    • D.

      Insurance company

    Correct Answer
    B. Employer
    Explanation
    The employer would be considered a possible applicant and contract policyholder for group health benefits because they are the ones who would typically apply for the health insurance coverage on behalf of their employees. The employer would be responsible for selecting the insurance plan, negotiating the terms, and paying the premiums. They would also be the main point of contact for the insurance company regarding any policy-related matters.

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  • 33. 

    If an employee contributes 50% toward the disability plan premium provided by an employer, what would be considered the taxable income of a $1,000 monthly disability benefit?

    • A.

      $100

    • B.

      $250

    • C.

      $500

    • D.

      $1,000

    Correct Answer
    C. $500
    Explanation
    If an employee contributes 50% towards the disability plan premium, it means that they are paying for half of the premium themselves. Therefore, only half of the $1,000 monthly disability benefit would be considered taxable income. This means that the taxable income would be $500.

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  • 34. 

    Continued coverage under COBRA would be provided to all of the following EXCEPT:

    • A.

      Former dependent of employee no longer of dependent status

    • B.

      Terminated employee

    • C.

      Divorced spouse of employee

    • D.

      A covered employee is terminated for gross misconduct

    Correct Answer
    D. A covered employee is terminated for gross misconduct
    Explanation
    COBRA provides continued coverage for employees and their dependents who experience a qualifying event such as termination, divorce, or loss of dependent status. However, if a covered employee is terminated for gross misconduct, they would not be eligible for continued coverage under COBRA.

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  • 35. 

    Which type of business insurance is meant to cover the costs of continuing to do business while the owner is disabled?

    • A.

      Disability overhead policy

    • B.

      Business continuation policy

    • C.

      Disability buy-sell policy

    • D.

      Business overhead expense policy

    Correct Answer
    D. Business overhead expense policy
    Explanation
    A business overhead expense policy is designed to cover the costs of continuing to do business while the owner is disabled. This type of insurance typically covers expenses such as rent, utilities, employee salaries, and other necessary business expenses. It helps to ensure that the business can continue operating and generating income even if the owner is unable to work due to a disability.

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  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
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    Kernsshanice
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