Arizona Life and Health Practice Exam

The purpose of the 'No-loss No-gain' provision is to avoid duplication of what?

1. Insurance policies and benefits

2. Premiums and deductibles

3. Benefit payments and overinsurance

4. Claims and reimbursements

The correct answer is: Benefit payments and overinsurance

The 'No-loss No-gain' provision is primarily designed to prevent overinsurance and ensure that an insured individual does not receive more in benefits than what they have lost. This provision is intended to maintain the principle of indemnity in insurance, where the goal is to restore the insured to the financial position they were in before the loss, rather than allowing them to profit from it. By implementing this provision, insurers can avoid situations where a policyholder might receive multiple benefit payments from different policies for the same loss, leading to a financial gain above their actual loss. This ensures that the benefits paid out align more closely with the actual financial impact experienced by the policyholder and prevents the potential for fraudulent claims or excessive insurance coverage. In contrast to this, other options relate to aspects such as premiums, deductibles, and reimbursements, which, while related to overall insurance practices, do not specifically address the primary concern of preventing a situation where the insured receives benefits that exceed their losses.