Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

A Major Medical Expense policy is designed to provide coverage for high-cost medical expenses after a basic health policy has been exhausted. This type of policy typically supplements a basic health plan, which may have limitations on the amount of benefits it pays out. When the basic policy runs out of benefits, the major medical policy will kick in to cover additional expenses, thereby helping to ensure that insured individuals have access to necessary medical care without the risk of overwhelming out-of-pocket costs.

The other scenarios presented do not accurately illustrate when a Major Medical Expense policy would take effect. For instance, hospitalizations or outpatient surgeries could activate benefits under other types of policies, but they do not specifically indicate that the limits of a basic policy have been reached. Furthermore, the idea that the policy would take effect immediately after purchase does not align with typical policy structures, as coverage often begins according to the terms agreed upon at policy issuance, which may include waiting periods or specific conditions for activation.