Tennessee Insurance Practice Exam

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Prepare for the Tennessee Insurance Exam with engaging flashcards and comprehensive multiple-choice questions. Understand hints and receive detailed explanations for each query. Ace your test with confidence!

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What is the objective of a Stop Loss provision in Major Medical Expense policies?

To provide coverage for routine check-ups
To limit an insured's out-of-pocket medical expenses
To cover all medical expenses without limits
To reduce premiums for the insured

The correct answer is: To limit an insured's out-of-pocket medical expenses

The objective of a Stop Loss provision in Major Medical Expense policies is to limit an insured's out-of-pocket medical expenses. This provision sets a maximum threshold for what the insured has to pay in a given plan year. Once this threshold is met, the insurance company covers all further medical expenses for that year. This feature is crucial for protecting individuals from substantial financial burdens associated with high medical costs that can arise from serious illnesses or lengthy treatments. The underlying principle is to ensure that no matter how high the expenses become, the insured will not bear the full risk beyond a specific amount, thereby providing financial security and peace of mind.