Life & Health Insurance Practice Exam

What does Stop Loss refer to in health insurance?

1. The limit on how much the insurance company pays overall

2. The maximum amount the insured pays out of pocket before the company covers 100%

3. The annual premium limit for policyholders

4. The total costs of surgeries in a lifetime

The correct answer is: The maximum amount the insured pays out of pocket before the company covers 100%

Stop Loss in health insurance refers to the maximum amount that the insured individual must pay out of pocket before the insurance company starts covering 100% of the costs for covered services. This feature is designed to protect policyholders from excessive financial burdens due to high medical expenses. Once the insured reaches this predetermined threshold, any further eligible medical expenses are fully covered by the insurance provider, alleviating the financial strain on the policyholder. Understanding Stop Loss is crucial for policyholders because it provides clarity on their financial exposure in the event of significant medical costs. It serves as an essential safeguard, ensuring that individuals are not subjected to unlimited medical expenses that could otherwise lead to severe financial hardship.