PSI Ohio Insurance Practice Exam

Which type of illnesses are covered by a dread disease policy?

1. Common diseases

2. Illnesses with frequent occurrences

3. Chronic conditions

4. Illnesses that do not occur frequently but incur significant costs

The correct answer is: Illnesses that do not occur frequently but incur significant costs

A dread disease policy is specifically designed to provide coverage for serious illnesses that occur infrequently but can be financially devastating due to their high treatment costs. These policies typically cover major diseases such as cancer, heart disease, or other critical illnesses that, while they may not be common in occurrence, can lead to significant medical expenses and financial strain for the insured. The focus of these policies is on safeguarding against the financial impact of major health issues, which is why they do not cover common or frequently occurring illnesses. Chronic conditions, while they may incur costs, are generally managed under standard health insurance policies rather than dread disease policies. Thus, the choice accurately reflects the purpose of dread disease insurance, which is to provide financial support for those less frequent, yet costly, health crises.