Massachusetts Health & Accident Insurance Practice Exam

What is an Elective Indemnity policy characterized by?

1. Long-term payments based on actual expenses

2. A short-term, lump sum payment for injuries

3. Unlimited lifetime coverage without exclusions

4. Monthly allowances for hospital stays

The correct answer is: A short-term, lump sum payment for injuries

An Elective Indemnity policy is characterized by providing a short-term, lump sum payment for injuries. This type of policy is designed to offer a specific amount of financial benefit to the insured at the time of a covered event, such as an injury, rather than ongoing payments or reimbursements based on incurred expenses. The focus is on delivering immediate financial relief that can be used flexibly by the insured to cover any costs related to their recovery or loss of income due to the injury. Other options describe different insurance characteristics: long-term payments typically relate to disability or long-term care policies, unlimited lifetime coverage often suggests a type of permanent insurance with a broader scope, and monthly allowances for hospital stays are common in health insurance plans that provide for ongoing costs rather than a one-time payment.