Arkansas Life and Health Insurance Practice Exam

Which of the following types of health insurance policies pays a lump sum benefit for a specified illness?

1. Dread disease insurance

2. Hospital indemnity insurance

3. Disability income insurance

4. Major medical insurance

The correct answer is: Dread disease insurance

Dread disease insurance typically pays a lump sum benefit upon the diagnosis of a specific illness listed in the policy, such as cancer or a heart attack. This type of policy is designed to provide financial assistance to cover expenses associated with the specified illness. In contrast, hospital indemnity insurance pays a daily, weekly, or monthly benefit while the insured is confined in a hospital. Disability income insurance provides periodic payments to replace income lost due to a disabling injury or illness. Major medical insurance covers a significant portion of medical expenses after a deductible has been met.