AD Banker Comprehensive Practice Exam

The purpose of the coordination of benefits is primarily to prevent which of the following?

1. Duplicate coverage

2. Reduced premiums

3. Increased claims

4. Extended care

The correct answer is: Duplicate coverage

The coordination of benefits is a process used by insurance providers to determine the order in which multiple insurance policies will pay benefits for a covered expense when a policyholder has more than one insurance coverage. The primary goal of this coordination is to prevent duplicate coverage, ensuring that the total benefits do not exceed the actual expenses incurred. When individuals are covered under multiple insurance plans, the coordination of benefits helps to clarify which plan is responsible for primary payment and which is secondary. This ensures that the same expense is not paid for by both insurance policies, which could lead to overpayments or provider abuse. Preventing duplicate coverage is crucial, as it helps maintain the integrity of the health insurance system and keeps premiums more manageable for all policyholders. The other options—reduced premiums, increased claims, and extended care—do not align with the primary aim of coordination of benefits, which is focused on avoiding overlapping payment scenarios between insurers.