Tennessee Insurance Practice Exam

What is the provision in a Group Health policy that allows postponement of coverage for 30 days after the policy's effective date called?

1. Grace period

2. Waiting period

3. Elimination period

4. Coverage deferral

The correct answer is: Waiting period

The provision in a Group Health policy that allows the postponement of coverage for 30 days after the policy's effective date is known as the waiting period. This period serves as a designated timeframe during which no benefits are payable for new conditions or treatments. It is a common feature in many group health plans, ensuring that newly enrolled members won't immediately start claiming benefits without contributing to the plan. The waiting period helps insurers mitigate the risk of adverse selection, where individuals may join a plan specifically to take immediate advantage of coverage for pending health issues. During this period, insured individuals are often encouraged to maintain their health and may even face a pre-existing condition limitation after the waiting period ends, depending on the specific terms of the policy. Other options like grace period, elimination period, and coverage deferral have different meanings and applications within insurance policies. The grace period refers to the time frame given to a policyholder to pay a premium after it is due without losing coverage. The elimination period usually relates to long-term disability insurance, marking the time between the onset of a disability and the start of benefit payments. Coverage deferral is not a standard term used in the context of health insurance policies.