A homeowner faces several loss exposures, including fire damage to the home, medical expenses from a family illness, and loss of income if the breadwinner is injured. A health insurance policy is designed to address:

Why A is correct

Loss exposures fall into categories — property, liability, and person (health and income) — and different policies address different exposures. A health insurance policy covers the medical expense exposure: the possibility that illness or injury produces medical bills. Property exposures (fire, theft) are handled by property insurance, liability exposures by liability coverage, and loss of income by disability income insurance. Matching the policy to the exposure is fundamental to sound risk management.

Why the other options are wrong

• B) Fire damage is a property loss exposure addressed by a homeowners policy, not by health insurance.
• C) Liability to guests is a liability exposure covered by the liability section of a homeowners or umbrella policy, not health insurance.
• D) Theft of personal property is a property exposure; health insurance does not indemnify property losses.

Memory hook

Health pays for the body's bills; property pays for the house's. Match the policy to the exposure.