Life & Health Insurance Practice Exam

What is the limitation for pre-existing conditions in disability insurance?

1. Coverage is provided without exclusions

2. Conditions are covered if disclosed

3. Limitations may apply to conditions prior to policy inception

4. All pre-existing conditions are fully covered

The correct answer is: Limitations may apply to conditions prior to policy inception

In the context of disability insurance, the limitation regarding pre-existing conditions is generally that limitations may apply to conditions that existed prior to the policy's inception. This means that if a policyholder has a medical condition that they were already diagnosed with or were receiving treatment for before the insurance policy started, the insurer may exclude coverage for that specific condition or limit the benefits associated with it. This practice is widely established to prevent adverse selection, where individuals might seek insurance coverage for conditions they already know could result in a claim. By applying limitations on pre-existing conditions, insurance companies manage the risk and ensure that the policies are sustainable and fair for all policyholders. The specifics can vary by insurer and the policy contract, but it is a common practice in the industry. The remaining options suggest either full coverage without restrictions or coverage based on disclosure, which do not accurately reflect standard practices regarding pre-existing conditions in disability insurance. Thus, the correct understanding focuses on the limitations that may apply to conditions present before the policy became active.