A specified disease policy, such as a cancer policy, typically pays benefits in what manner?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A specified disease policy pays a predetermined amount upon diagnosis of a named disease, commonly cancer, under a benefit schedule that may include lump-sum payments, daily hospital benefits, and allowances for treatment. These are limited policies: the benefit amount is fixed in the contract and does not reimburse every expense actually incurred. They are intended to supplement, not replace, comprehensive medical coverage, and agents must ensure applicants understand the narrow scope of the disease trigger before purchasing so the applicant does not overestimate the policy's role.
Why the other options are wrong
- B) Paying every medical bill without limit describes comprehensive major medical coverage; a specified disease policy pays contract-defined amounts rather than actual charges.
- C) A specified disease policy pays for the named illness only; accident-only coverage is a separate limited policy that responds to injuries, not disease.
- D) Wage replacement during disability is the function of disability income insurance; a specified disease policy pays on diagnosis of the covered disease regardless of work status.
Memory hook
Specified disease = named illness, stated check. Cancer diagnosed = benefit check, no matter the hospital bill.