AD Banker Comprehensive Practice Exam

The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following?

1. Waiting period

2. Probationary period

3. Morbidity table

4. Exclusion

The correct answer is: Probationary period

The correct term for the specified period that must elapse before new coverage is effective for nonaccidental losses is commonly known as the probationary period. This is specifically applicable in health and disability insurance, where coverage for certain conditions may not activate immediately upon enrollment. The purpose of the probationary period is to prevent adverse selection and ensure that individuals do not enroll just to claim benefits for pre-existing conditions or other deliberate nonaccidental losses that may arise shortly after obtaining coverage. By having a probationary period in place, insurers protect themselves from individuals who might seek coverage only when they anticipate needing it imminently. The completion of this period ensures that policyholders have the required time to prove their intent to maintain the policy and allows for a smoother claims process once coverage becomes effective. In contrast, the waiting period is a term that can apply broadly to various insurance contexts but often refers to the time before benefits are paid rather than before coverage starts. Morbidity tables assist in predicting health-related risks but do not affect coverage terms. Exclusions refer to specific conditions or situations that are not covered by the insurance policy. Each of these choices relates to different aspects of insurance coverage but does not capture the specific nature of the time frame established before coverage can commence for