20 Critical Illness Insurance Quiz Questions and Answers

Question 1:
What is the primary purpose of critical illness insurance?
A) To cover routine medical check-ups
B) To provide a lump sum payment upon diagnosis of a specified critical illness
C) To pay for daily hospital stays
D) To cover accidental injuries only

Answer: B
Explanation: Critical illness insurance is designed to offer financial support by paying a lump sum amount when the policyholder is diagnosed with a covered critical illness, such as cancer or stroke, helping to cover treatment costs and other expenses.

Question 2:
Which of the following is typically NOT covered under a standard critical illness policy?
A) Heart attack
B) Cancer
C) Common cold
D) Stroke

Answer: C
Explanation: Standard critical illness policies cover serious conditions like heart attack, cancer, and stroke, but exclude minor ailments like the common cold, as they are not defined as critical illnesses.

Question 3:
How does critical illness insurance differ from health insurance?
A) It covers only preventive care
B) It provides a lump sum for specific illnesses rather than ongoing medical expenses
C) It is only for elderly people
D) It does not involve any premiums

Answer: B
Explanation: Unlike health insurance, which reimburses ongoing medical costs, critical illness insurance pays a one-time lump sum upon diagnosis of a covered illness, allowing policyholders to use the funds as needed.

Question 4:
What factor can increase the premium for a critical illness insurance policy?
A) Younger age of the policyholder
B) Smoking history
C) Living in a rural area
D) Having multiple policies

Answer: B
Explanation: Premiums are often higher for individuals with risk factors like smoking, as it increases the likelihood of developing critical illnesses, making the policy more expensive for the insurer.

Question 5:
In critical illness insurance, what is a “waiting period”?
A) The time after policy purchase before claims can be made
B) The duration of hospital stay required for coverage
C) The age limit for policy renewal
D) The cooling-off period for cancellation

Answer: A
Explanation: A waiting period is the initial time frame after buying the policy during which no claims for critical illnesses can be filed, allowing the insurer to mitigate immediate risks.

Question 6:
Which illness is most commonly included in critical illness insurance policies?
A) Diabetes
B) Heart disease
C) Allergies
D) Minor fractures

Answer: B
Explanation: Heart disease is a standard inclusion in most critical illness policies due to its prevalence and severity, providing coverage for events like heart attacks.

Question 7:
What happens if a policyholder survives the critical illness after claiming?
A) The policy ends immediately
B) They receive ongoing payments
C) The lump sum is the only payout
D) Premiums are refunded

Answer: C
Explanation: Critical illness insurance typically provides a single lump sum payment upon diagnosis and survival of the specified period, after which the policy may end, depending on the terms.

Question 8:
Can critical illness insurance be combined with life insurance?
A) No, they are mutually exclusive
B) Yes, as a rider on a life insurance policy
C) Only for people under 30
D) It voids the life insurance

Answer: B
Explanation: Many life insurance policies allow critical illness coverage as an add-on rider, providing additional protection without needing a separate policy.

Question 9:
What is an exclusion in critical illness insurance?
A) A covered illness
B) A condition not included in the policy, like pre-existing diseases
C) A bonus for early renewal
D) A type of premium discount

Answer: B
Explanation: Exclusions are specific conditions, such as pre-existing illnesses, that are not covered to prevent adverse selection and manage insurer risks.

Question 10:
How is the payout determined in critical illness insurance?
A) Based on the policyholder’s income
B) As a fixed lump sum stated in the policy
C) Proportional to hospital bills
D) Annually after diagnosis

Answer: B
Explanation: The payout is predetermined as a fixed amount in the policy document, ensuring the policyholder knows exactly what to expect upon a valid claim.

Question 11:
What role does medical underwriting play in critical illness insurance?
A) It assesses the policyholder’s health risks before issuing the policy
B) It handles claims processing
C) It provides free health check-ups
D) It renews the policy automatically

Answer: A
Explanation: Medical underwriting evaluates the applicant’s health history and risks to determine premium rates and coverage eligibility, ensuring fair pricing.

Question 12:
Is critical illness insurance tax-deductible in most countries?
A) Always yes
B) It depends on the country’s tax laws and policy structure
C) Never, as it’s considered an investment
D) Only for senior citizens

Answer: B
Explanation: Tax deductibility varies by jurisdiction; in some places, premiums may be deductible if they meet certain criteria, but it’s not universal.

Question 13:
What is the typical claim process for critical illness insurance?
A) Automatic payment without documentation
B) Submission of medical certificates and diagnosis proof
C) Waiting for a court decision
D) Annual review of health records

Answer: B
Explanation: Policyholders must provide verified medical evidence, such as diagnosis certificates, to process a claim, ensuring legitimacy and accuracy.

Question 14:
Can you cancel a critical illness policy mid-term?
A) No, it must run to full term
B) Yes, but you may forfeit some benefits or receive a partial refund
C) Only if you’re illness-free
D) It automatically renews

Answer: B
Explanation: Policies can often be canceled before maturity, but this may result in loss of coverage and potential refunds based on the policy’s surrender value.

Question 15:
What is a survival period in critical illness insurance?
A) The time the policyholder must survive after diagnosis to claim
B) The policy’s total duration
C) The renewal period
D) The waiting time for premiums

Answer: A
Explanation: Many policies require the policyholder to survive a certain period (e.g., 30 days) after diagnosis to qualify for the payout, confirming the illness’s impact.

Question 16:
How does age affect critical illness insurance premiums?
A) Younger people pay more
B) Older people generally pay higher premiums
C) Age has no impact
D) Premiums decrease with age

Answer: B
Explanation: Premiums increase with age due to higher risk of critical illnesses in older individuals, making coverage more expensive for them.

Question 17:
What is a critical illness rider?
A) An additional feature added to another insurance policy
B) A standalone policy for minor illnesses
C) A discount on premiums
D) A claim rejection notice

Answer: A
Explanation: A rider is an optional add-on to policies like life insurance, providing critical illness coverage without purchasing a separate policy.

Question 18:
Are pre-existing conditions always excluded from critical illness insurance?
A) No, some policies may cover them after a waiting period
B) Yes, they are never covered
C) Only if disclosed
D) They are covered immediately

Answer: A
Explanation: While many policies exclude pre-existing conditions, some may offer coverage after a specified waiting period or with higher premiums.

Question 19:
What benefits does critical illness insurance provide beyond medical costs?
A) It only covers medical bills
B) Financial support for living expenses, rehabilitation, or debt repayment
C) Educational funding for children
D) Travel insurance

Answer: B
Explanation: The lump sum can be used for various needs, such as daily expenses, home modifications, or rehabilitation, not just direct medical costs.

Question 20:
Why might someone purchase critical illness insurance?
A) To replace lost income during illness
B) To ensure financial stability in case of a serious health event
C) For routine health coverage
D) As a retirement plan

Answer: B
Explanation: It provides a safety net by offering a payout for covered illnesses, helping maintain financial stability during treatment and recovery.