STUDY GUIDE · HEALTH INSURANCE

Health Insurance License Exam Study Guide

Verified against the official content outline July 18, 202613 sections

Written by Every Exam Prep Editorial TeamSource and review policyPublished July 6, 2026Updated July 8, 2026

On this guide

Passing score: 70%
Exam fee: $50
Governing body: State DOI

Purpose of the exam

The health insurance license exam certifies that you understand the products, laws, and ethical duties involved in selling accident and health (A&H) insurance to consumers. Passing it is a prerequisite for obtaining a resident producer (agent) license in the accident-and-health line of authority.

Typical content domains

Most health insurance licensing exams are organized into two broad buckets: a general knowledge section covering insurance principles that apply across all lines, and a state-specific section covering the statutes and regulations of the jurisdiction issuing your license.

General insurance concepts — risk, insurable interest, the contract of adhesion, indemnity, and how insurers pool and price risk.
Health insurance basics — medical expense, disability income, long-term care, dental/vision, and supplemental coverages.
Policy provisions, riders, and options — required and optional provisions, exclusions, and how they modify coverage.
Federal programs and regulation — the interaction between private coverage and government programs.
State law and producer conduct — licensing requirements, unfair trade practices, and ethics.

Because the exam is split this way, a strong strategy is to master the transferable general concepts first, then layer your specific jurisdiction's rules on top.

The Four Core Products

Almost every life exam question about product types hinges on one distinction: does the policy build cash value, and who bears the investment risk? Anchor your studying to that framework.

Term Insurance

Term insurance covers a specified period and pays a death benefit only if the insured dies within that term. It builds no cash value, which is precisely why it costs the least per dollar of coverage — you are paying for pure protection with nothing set aside for savings. A common variant is decreasing term, whose death benefit shrinks over time; because a mortgage balance also shrinks over time, decreasing term is frequently paired with home loans.

Whole Life

Whole life is the classic permanent product: a level premium, a guaranteed death benefit, and a guaranteed cash value that grows on a fixed schedule. Because everything is guaranteed, the insurer — not the policyowner — carries the risk. The policy is designed so that the cash value equals the face amount at maturity, typically age 100 or 121; if the insured reaches that age, the policy "endows" and pays out.

Universal and Variable Life

Universal life is flexible-premium permanent insurance that unbundles the mortality, expense, and interest components, letting the policyowner adjust premiums and death benefits within limits. Its cash value earns a current interest rate, but a contractual guaranteed minimum protects against a total collapse of the crediting rate. Variable life goes a step further: its cash value is invested in separate-account subaccounts, so values fluctuate with investment performance and the policyowner bears the investment risk. Because a variable policy is legally a security, selling it requires a FINRA registration on top of a life license — a favorite exam trap.

Foundational vocabulary

A large share of exam questions test whether you can correctly apply a handful of foundational terms. Learn the precise definition of each, not just a rough sense of it, because distractor answers are usually written to reward imprecision.

Risk — the uncertainty of loss. Insurable risks are pure (loss-or-no-loss), not speculative (which involve a chance of gain).
Insurable interest — in health insurance, a person always has an insurable interest in their own life and health; the requirement is generally satisfied at the time of application.
Indemnity — the principle of restoring an insured to their pre-loss financial position without profit.
Adverse selection — the tendency of higher-risk individuals to seek insurance more than lower-risk ones, which underwriting exists to counter.
Utmost good faith — both parties rely on the honesty of the other, which is why material misrepresentation on an application can void coverage.

Contract characteristics

Insurance policies are contracts of adhesion (drafted by the insurer, so ambiguity is construed against them), aleatory (the values exchanged may be unequal), unilateral (only the insurer makes a legally enforceable promise), and conditional (benefits are owed only if conditions are met). Expect several questions that simply ask you to match a scenario to the correct characteristic.

Standard Provisions

Provisions are the built-in rules of a policy; riders are optional add-ons you attach for extra benefits. Exam questions love the time-based provisions, so memorize the clocks first.

Grace period: after a missed premium the owner gets typically 30 or 31 days during which coverage stays in force.
Incontestability: once the policy has been in force for two years, the insurer cannot contest it for misstatements or concealment — except for nonpayment of premium.
Suicide clause: the insurer excludes death by suicide during the first two years, limiting its liability to a refund of premiums paid.

Notice that incontestability and the suicide clause share the same two-year window; that parallel is deliberate and testable.

Adjustments and Guarantees

If the insured's age or sex was misstated on the application, the misstatement of age provision adjusts the death benefit to what the premium actually paid would have purchased at the correct age — the insurer does not void the policy, it re-prices the benefit. If the owner stops paying on a policy with cash value, nonforfeiture options guarantee that cash value through cash surrender, reduced paid-up insurance, or extended term.

Common Riders

Waiver of premium: waives premiums if the insured becomes totally disabled.
Guaranteed insurability: lets the insured buy additional coverage at set intervals without evidence of insurability.
Accelerated death benefit: advances part of the death benefit if the insured is diagnosed as terminally ill.

The Mirror Image of Life Insurance

An annuity liquidates a principal sum into a stream of income and protects against outliving one's assets — it is the mathematical opposite of life insurance, which protects against dying too soon. If you understand life insurance as protection against premature death, an annuity is protection against living too long.

Fixed vs. Variable

A fixed annuity guarantees a minimum interest rate and payout, with the insurer bearing the investment risk. A variable annuity invests in separate accounts, shifts investment risk to the owner, and is a security requiring registration. This is the same risk-and-securities split you saw between whole life and variable life — the fixed/guaranteed product keeps the risk with the insurer, while the separate-account product pushes risk to the owner and triggers securities licensing.

Payout Options

Payout options trade income size against longevity protection. The life-only option provides the largest payment because it ceases at death, leaving nothing for survivors. Options such as life with period certain and joint-and-survivor reduce the payment in exchange for a guarantee to beneficiaries or a second life.

Major product lines

The exam expects you to distinguish product lines by what they pay for and how they pay.

Medical expense insurance — covers the cost of medical care. Modern managed-care forms include HMOs (care through a network and a primary care physician gatekeeper), PPOs (network flexibility with lower cost in-network), and POS plans that blend the two.
Disability income insurance — replaces a portion of lost income when the insured cannot work due to sickness or injury. Key variables are the elimination (waiting) period, the benefit period, and the definition of disability (own-occupation vs. any-occupation).
Long-term care (LTC) — pays for custodial and skilled care, often triggered by the inability to perform activities of daily living.
Supplemental and limited plans — dental, vision, critical illness, hospital indemnity, and Medicare supplement (Medigap) policies that fill specific gaps.

How benefits are paid

Distinguish reimbursement/expense-incurred plans (which pay actual covered costs) from indemnity/fixed-benefit plans (which pay a set dollar amount per event regardless of actual cost). This distinction drives many scenario questions.

Cost-Sharing in Major Medical

Major medical plans cover hospital, surgical, and physician expenses subject to a deductible, coinsurance, and an out-of-pocket maximum. Learn these three levers as a sequence: the insured pays the deductible first, then shares costs through coinsurance, until spending reaches the out-of-pocket maximum, after which the plan pays fully.

Managed Care: HMO vs. PPO

An HMO emphasizes prepaid care through a network and typically requires a primary care physician as a gatekeeper for referrals. A PPO offers lower cost-sharing in-network but allows out-of-network care at higher cost. The trade-off is control versus flexibility: the HMO's gatekeeper model restrains cost by channeling care, while the PPO lets members go out-of-network for a price.

Income and Care Protection

Two products protect against the financial side of illness rather than medical bills. Disability income insurance replaces a portion of lost earnings after an elimination period, and its definition of disability — own-occupation or any-occupation — determines how easily a claim qualifies. Long-term care insurance covers custodial and skilled care and pays benefits when the insured cannot perform a stated number of activities of daily living.

Required and optional provisions

Health policies contain standardized provisions, many derived from model laws adopted across jurisdictions. Learn to separate provisions that protect the insured (such as the grace period, reinstatement, and the free-look/right-to-examine period) from those that protect the insurer (such as time limits on defenses and proof-of-loss requirements).

Grace period — time after a missed premium during which coverage stays in force.
Reinstatement — the process for restoring a lapsed policy, often with a new incontestability window for statements on the reinstatement application.
Incontestability — after a set period in force, the insurer generally cannot void the policy for misstatements (fraud is often treated differently).

Underwriting and the application

The application is the primary source of underwriting information and becomes part of the contract. A material misrepresentation — a false statement that would have changed the underwriting decision — can allow the insurer to rescind coverage during the contestable period. Expect questions distinguishing misrepresentation, concealment, and fraud, and testing whether the producer collected and recorded information honestly.

Death Benefits and Premiums

Start with the general rule: a life insurance death benefit paid to a named beneficiary in a lump sum is generally received income-tax-free. But if the beneficiary elects a settlement option instead of a lump sum, the principal remains tax-free while any interest earned is taxable. Working the other direction, premiums for personal life insurance are not tax-deductible — the tax advantage sits on the benefit side, not the payment side.

When Favorable Treatment Is Lost

A policy that fails the seven-pay test by being overfunded becomes a modified endowment contract (MEC). A MEC loses favorable treatment: loans and withdrawals are taxed on a last-in-first-out (LIFO) basis and may incur a 10% penalty before age 59½. This is why over-stuffing a policy for tax-free access can backfire.

Annuity and Group Taxation

Annuities are taxed under the exclusion ratio: each payment is part tax-free return of principal and part taxable earnings, with earnings taxed as ordinary income. As with a MEC, withdrawals from an annuity before age 59½ generally incur a 10% early-withdrawal penalty — note how both products use the 59½ threshold. To move value without triggering current tax, a 1035 exchange lets an owner swap one life or annuity contract for another of like kind. Finally, employer-paid group life coverage up to $50,000 is tax-free to the employee, and the cost of coverage above that is reported as imputed income.

Why this section matters

The law-and-ethics portion is where many candidates lose points, because the answers turn on precise legal duties rather than intuition. Insurance is primarily regulated at the state level, and the producer's conduct is held to defined standards.

Prohibited practices

Misrepresentation — making false statements about a policy's terms or benefits.
Twisting — using misrepresentation to induce a client to replace an existing policy to their detriment.
Churning — replacing policies to generate commissions with no benefit to the client.
Rebating — offering something of value not stated in the policy to induce a sale (prohibited in most jurisdictions).
Defamation, boycott, and unfair discrimination — categories commonly listed as unfair trade practices.

Fiduciary and disclosure duties

A producer handling client premiums holds those funds in a fiduciary capacity and must not commingle them with personal funds. Producers must also present accurate information, respect suitability where required, and disclose their role. Framing these as duties owed to the client — not merely rules to memorize — makes the scenario questions much easier to reason through.

Insurable Interest

In life insurance, insurable interest must exist only at the inception of the policy, not at the time of the loss — a critical contrast with property insurance, which requires it at the time of loss. A person is presumed to have unlimited insurable interest in their own life, so the timing rule matters most for policies one person takes on another.

Underwriting and Information Sources

Underwriting is the process of classifying and pricing risk. The insurer classifies applicants as preferred, standard, or substandard, or declines them outright. To do this, insurers draw on the MIB (Medical Information Bureau), a nonprofit database of coded medical impressions shared among member insurers. When an insurer obtains a consumer or investigative report, the Fair Credit Reporting Act requires it to notify the applicant, who has the right to know the nature of the information collected.

Beneficiary Designations

A primary beneficiary is first in line, and a contingent beneficiary receives proceeds only if the primary predeceases the insured. Control over changes depends on the type: a revocable beneficiary can be changed at any time by the owner, whereas an irrevocable beneficiary must consent to a change. And if no beneficiary survives, proceeds are paid to the insured's estate — which is why naming a contingent beneficiary is worth the effort, since it keeps proceeds out of probate.

Build a plan around question types

Health insurance exams reward recall of definitions and the ability to apply them to short scenarios. Split your study time between memorizing precise terminology and practicing applied questions.

Learn definitions cold. Use flashcards for cost-sharing terms, provisions, and prohibited practices where a single word changes the correct answer.
Practice full-length timed tests. Simulate the real time limit so pacing becomes automatic and you learn to flag and return to hard items.
Review every miss. For each wrong answer, write one sentence explaining why the correct choice is right and why your choice was wrong — this converts errors into durable learning.
Separate general from state material. Study the transferable concepts first, then drill your specific jurisdiction's licensing rules, timelines, and prohibited practices.

On exam day

Read each question fully before looking at the answers, watch for qualifier words like always, never, except, and not, and eliminate obviously wrong choices before deciding. Because many questions are answerable by elimination, disciplined reading is often worth more than additional memorization.

Health Insurance flashcards

34 cards on the highest-yield terms and rules. Grading uses spaced repetition and saves in this browser.

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Browse all 34 cards

What is the difference between an HSA and an FSA?
An HSA is a portable, individually owned savings account paired with a high-deductible health plan (HDHP) and funds roll over; an FSA is employer-owned and is generally 'use-it-or-lose-it.'
What is the 'own occupation' vs. 'any occupation' definition of total disability?
'Own occupation' pays if you can't perform your specific job; 'any occupation' pays only if you can't perform any job you're reasonably suited for — a stricter standard.
What is the taxation of individually paid disability income benefits?
When premiums are paid with after-tax dollars by the individual, the disability benefits received are generally income tax-free.
What is the Grace Period provision?
A set number of days after a premium due date during which the policy stays in force and the overdue premium can still be paid without lapse.
What is a Preexisting Condition under a health policy?
A condition for which the insured received medical advice or treatment before the policy's effective date; coverage for it may be limited or excluded for a stated period.
What is the elimination period in a disability income policy?
A waiting period after a disability begins during which no benefits are paid; it acts as a time deductible (common: 30, 60, or 90 days).
Define 'guaranteed renewable' health insurance.
The insurer must renew the policy (cannot cancel) as long as premiums are paid, but may raise premiums by class — never for an individual insured alone.
What is coinsurance in a major medical plan?
The percentage split of covered costs between insurer and insured after the deductible (e.g., 80/20 means the insurer pays 80%, the insured 20%).
What is the purpose of a stop-loss (out-of-pocket maximum) provision?
It caps the insured's total out-of-pocket coinsurance/deductible costs for the year; the insurer then pays 100% of covered expenses.
What is the Probationary Period in a health policy?
A period after the policy's effective date during which sickness-related claims (often for specified conditions) are not covered.
HMO vs. PPO: key structural difference?
An HMO requires using in-network providers and a primary care physician (PCP) for referrals; a PPO allows out-of-network care at higher cost and needs no referrals.
What does the Time Limit on Certain Defenses (incontestability) provision do?
After the policy has been in force for a set period (commonly 2–3 years), the insurer cannot contest claims or void the policy for misstatements (except fraud, if allowed).
What is the Free-Look period in a health insurance policy?
A window after delivery (commonly 10 days) during which the policyowner may return the policy for a full premium refund.
What does 'indemnity' mean in a medical expense plan?
Benefits are paid based on actual covered expenses incurred (reimbursement), rather than a fixed flat amount regardless of cost.
What is HIPAA and what is its primary purpose in health insurance?
HIPAA (Health Insurance Portability and Accountability Act) protects patient privacy and ensures portability of health insurance coverage. It sets national standards for protecting sensitive health information and gives patients rights to access their medical records.
Define 'pre-existing condition' and how the ACA changed its treatment.
A pre-existing condition is any health condition diagnosed or treated before enrollment. The Affordable Care Act prohibits health insurers from denying coverage or charging more based on pre-existing conditions for all applicants.
What is the individual mandate and what penalty applied under the ACA?
The individual mandate required most U.S. citizens to maintain minimum health insurance or pay a penalty. The penalty was calculated as a percentage of household income or a flat amount, whichever was greater, and was reduced to zero starting in 2019.
Explain medical loss ratio (MLR) and its regulatory importance.
MLR is the percentage of premium dollars spent on medical care versus administrative costs. The ACA requires health insurers to maintain an MLR of at least 80% (individual/small group) or 85% (large group), or they must rebate excess premiums to consumers.
What are the essential health benefits that ACA-compliant plans must cover?
Essential health benefits include ambulatory care, emergency room, hospitalization, maternity and newborn care, mental health/substance abuse treatment, prescription drugs, rehabilitative services and devices, laboratory services, and preventive and wellness services.
What is a health savings account (HSA) and who is eligible?
An HSA is a tax-advantaged savings account for medical expenses. Eligibility requires enrollment in a high-deductible health plan (HDHP), having no other health coverage, and not being claimed as a dependent on another tax return. Contributions are tax-deductible and grow tax-free.
Define 'coordination of benefits' and its purpose in health claims.
Coordination of benefits (COB) is the process of determining the order in which multiple insurers pay benefits when a person is covered under more than one health plan. It prevents overpayment and ensures the total benefit does not exceed the actual loss.
What is 'adverse selection' and why do insurers care about it?
Adverse selection occurs when higher-risk individuals are more likely to purchase insurance, resulting in higher claims costs for the insurer. Insurers address it through underwriting, medical underwriting, waiting periods, and risk pools.
Explain the difference between 'open enrollment' and 'special enrollment periods.'
Open enrollment is the annual period when individuals can enroll in or change health plans without medical underwriting. Special enrollment periods allow enrollment outside open enrollment for qualifying events like job loss, marriage, birth, or loss of other coverage.
What information must be included in a Summary of Benefits and Coverage (SBC)?
The SBC is a standardized document that explains plan coverage and costs in consumer-friendly terms. It must include coverage examples, cost-sharing details, exclusions, restrictions, contact information, and a glossary of terms.
Define 'subrogation' in health insurance claims.
Subrogation is the insurer's legal right to recover from a responsible third party the amount it paid for medical treatment. This prevents the insured from receiving payment twice for the same injury and reduces the insurer's claims costs.
What is a 'formulary' and what role does it play in pharmacy coverage?
A formulary is a list of prescription drugs covered by an insurance plan, typically organized by drug tiers with different cost-sharing levels. It helps manage drug costs and encourages the use of lower-cost, clinically equivalent medications.
Explain 'network adequacy' requirements for health insurers.
Network adequacy requires insurers to maintain sufficient healthcare providers in their network to ensure accessible care. States and the federal government define minimum standards for provider availability, travel distance, and appointment wait times.
What is 'underwriting' in health insurance and what factors can be considered?
Underwriting is the process of evaluating applicants' health status and risk to determine eligibility and rates. In health insurance, the ACA limits underwriting to age and tobacco use for individual plans; most medical underwriting is prohibited.
Define 'guaranty fund' and when coverage applies.
A guaranty fund is a state-mandated mechanism to protect policyholders if a health insurer becomes insolvent. It typically covers unpaid claims and may continue coverage temporarily while seeking a replacement insurer or resolving the insolvency.
What are 'out-of-pocket maximums' and how do they function?
An out-of-pocket maximum is the most a consumer must pay per year for covered health care services. Once this limit is reached, the health plan covers 100% of covered services; it includes deductibles, copayments, and coinsurance but typically excludes premiums.
Explain 'waiting periods' in health insurance and their regulatory limits.
A waiting period is the time between enrollment and coverage activation for specific conditions or services. The ACA limits waiting periods to 90 days maximum. Pre-existing condition waiting periods are prohibited for group health plans.
What is the 'Marketplace' (Healthcare.gov) and how does subsidy eligibility work?
The Marketplace is the federally-facilitated exchange where individuals can compare and purchase ACA-compliant health plans. Subsidies (tax credits) reduce premiums for those earning 100-400% of the federal poverty level; eligibility is based on projected annual income.
Define 'grace period' in health insurance and when it applies.
A grace period is a specified time (usually 30 days) after a premium payment is due during which coverage remains in effect even if payment is not received. During the grace period, the insurer must attempt to collect the overdue premium.
What is 'creditable coverage' and why does it matter for continuous coverage?
Creditable coverage is health insurance that meets federal standards for comprehensiveness and is recognized when calculating pre-existing condition waiting periods. It includes employer plans, government programs, and most individual policies—maintaining creditable coverage prevents waiting period penalties.

Health Insurance glossary

The Health Insurance License Exam is an assessment that measures a candidate's knowledge of the health and related insurance concepts a producer must master before selling coverage, including major medical plans with their deductible, coinsurance, and out-of-pocket maximum, HMO gatekeeper and PPO out-of-network rules, disability income with its elimination period, and long-term care benefits triggered by activities of daily living.

29 terms the Health Insurance tests, defined in plain English.

Adverse Selection: The tendency of individuals with higher health risk or anticipated need for services to purchase insurance more readily than those in good health, which insurers manage through underwriting, rate adjustment, or plan design.
Appeal: A formal request by an insured or provider to reconsider an insurer's decision, such as a claim denial or coverage determination. Appeals typically follow a staged process with internal and external review options.
Beneficiary: The person or entity designated to receive policy benefits, such as a death benefit, upon the occurrence of the insured event.
Claim: A formal request submitted by an insured or provider to the insurer for payment of covered health services. Claims include documentation such as itemized bills, service dates, and diagnosis codes necessary for processing.
COBRA: A federal law requiring most employers to offer continued group health insurance coverage to employees and their families after employment ends, typically for up to 18 months at the employee's cost plus an administrative fee.
Coinsurance: The percentage of covered medical costs the insured pays after meeting the deductible, while the insurer covers the remaining percentage. For example, 80/20 coinsurance means the insurer pays 80% and the insured pays 20% of eligible expenses.
Continuation of Coverage: Provisions that allow an insured to maintain health insurance after a qualifying life event such as job loss, divorce, or loss of dependent status, often with conditions and time limits defined by state or federal law.
Coordination of Benefits: The process of determining the order and amount each insurer pays when an insured has coverage under multiple health insurance policies, ensuring benefits don't exceed 100% of expenses and preventing duplicate payments.
Copayment: A flat, fixed dollar amount the insured pays for a specific covered service, such as a doctor visit or prescription, at the time the service is received.
Deductible: The fixed dollar amount the insured must pay out of pocket for covered medical expenses before the insurer begins to pay benefits.
Denial: An insurer's decision to refuse payment for a claim, typically based on exclusions, lack of medical necessity, policy limits, or violation of policy terms. Insureds have the right to appeal denials.
Dependent: A person, such as a spouse or child, who is designated on a health insurance policy to receive coverage benefits. Eligibility and age limits for dependents are defined in the policy and vary by plan type.
Elimination Period: A waiting period after a disability or loss begins during which no benefits are paid, functioning like a time-based deductible common in disability income insurance.
Exclusion: A specific condition, treatment, service, or person that is not covered by a health insurance policy. Common exclusions include cosmetic procedures, experimental treatments, and services not ordered by a licensed provider.
Explanation of Benefits: A document sent to the insured after claim processing that details what services were billed, what the insurer allowed, what the insured owes, and what the insurer paid, serving as a record separate from the actual bill.
Formulary: The official list of prescription medications covered by a health plan, typically organized by tier (generic, preferred brand, non-preferred brand), determining copayment amounts and coverage availability.
Grace Period: A brief window of time, typically 30 days, during which an insured can pay an overdue premium without losing coverage or facing penalties, allowing time to address payment delays.
Guaranteed Renewable: A policy provision under which the insurer must renew coverage as long as premiums are paid, though it may raise premiums by class, but not for an individual insured.
Managed Care: A health delivery system, such as an HMO or PPO, that controls costs and coordinates care through provider networks, utilization review, and negotiated rates.
Medically Necessary: A standard used by insurers to determine whether a health service or supply is covered—generally defined as being appropriate, necessary to treat an illness or injury, and not experimental or for convenience.
Network Provider: A healthcare provider (doctor, hospital, pharmacy) that has a contract with a health insurance plan to deliver services at negotiated rates, typically requiring lower cost-sharing than out-of-network providers.
Out-of-Pocket Maximum: The most the insured will have to pay for covered expenses in a policy period; once reached, the insurer pays 100% of remaining covered costs.
Pre-existing Condition: A medical condition that existed before the effective date of a health insurance policy, which may affect coverage eligibility or benefit waiting periods.
Preauthorization: Advance approval from the insurer that a specific medical service is covered before it is performed, commonly required for surgeries, hospital stays, or high-cost procedures to confirm medical necessity and coverage.
Premium: The amount of money the policyowner pays to the insurer to keep a health insurance policy in force, typically on a monthly, quarterly, or annual basis.
Renewal: The automatic continuation of a health insurance policy for another coverage period, provided premiums are paid and the insurer offers to renew. Policies may be renewed guaranteed or at the insurer's discretion.
Rider: An amendment attached to a policy that adds, modifies, or excludes coverage, allowing the policy to be tailored to the insured's needs.
Underwriting: The insurer's process of evaluating an applicant's risk to decide whether to issue coverage and at what premium rate.
Waiting Period: A specified time between policy issue or enrollment and when coverage for certain services becomes effective. Often applies to pre-existing conditions, maternity care, or specific treatments under group or individual plans.

Frequently asked questions

What's the difference between an HMO and a PPO on the health insurance exam?

An HMO emphasizes prepaid care through a network and typically requires you to use a primary care physician as a gatekeeper for referrals to specialists. A PPO offers a network with lower cost-sharing when you stay in-network but still allows out-of-network care at a higher cost. In short: an HMO trades flexibility for lower cost and coordinated care, while a PPO trades some cost savings for the freedom to go out of network without a referral.

How do the deductible, coinsurance, and out-of-pocket maximum work in a major medical plan?

Major medical plans cover hospital, surgical, and physician expenses subject to three cost-sharing features: a deductible, coinsurance, and an out-of-pocket maximum. You first pay covered costs up to the deductible; after that, coinsurance splits remaining costs between you and the insurer; and once your spending reaches the out-of-pocket maximum, the insurer pays 100% of further covered charges. Understanding the order these apply is a common exam point.

What is an elimination period in disability income insurance?

Disability income insurance replaces a portion of your lost earnings after an elimination period — a waiting period between the onset of disability and when benefit payments begin. The policy also defines disability as either own-occupation (unable to perform your own job) or any-occupation (unable to perform any job for which you're suited). Because a longer elimination period means the insured absorbs more of the early income loss, it functions much like a deductible measured in time.

What triggers benefits under a long-term care policy?

Long-term care insurance covers custodial and skilled care and pays benefits when the insured cannot perform a stated number of activities of daily living (ADLs) — everyday functions such as bathing, dressing, eating, and transferring. Because the benefit trigger is based on functional ability rather than a specific diagnosis, exam questions often focus on how many ADLs an insured must be unable to perform before coverage begins.

Official sources

Primary documents used to verify the exam details shown on this page.

PSI Test Takers — Exam SchedulingPSItest-takers.psiexams.com
TDI — Become a Licensed AgentTexas Department of Insurancetdi.texas.gov
National Insurance Producer RegistryNIPRnipr.com
State Insurance Department DirectoryNAICcontent.naic.org

Last verified against the official exam content outline: July 18, 2026