Insurance Awareness - Health Insurance
In health insurance, which of the following best explains why insurers require a waiting period for pre-existing diseases?
In health insurance, which of the following best explains why insurers require a waiting period for pre-existing diseases?
medium Q7 of Q15
Step-by-Step Solution
Step 1: Understand insurer's risk management
Waiting periods help prevent adverse selection, where people buy insurance only when ill.Step 2: Evaluate options
Option A correctly explains the rationale: to prevent adverse selection and financial loss. Options B, C, and D are incomplete or incorrect reasons.Final Answer:
To prevent adverse selection and financial loss → Option AQuick Check:
Waiting periods maintain insurer's financial stability by managing risk.
Quick Trick: Waiting period combats adverse selection.
Common Mistakes:
MISTAKES- Confusing waiting period purpose with policy switching or disclosure enforcement.
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