Final answer:
A limited policy typically provides coverage for specific events and pays a set amount. Accidental death and dismemberment (AD&D) insurance is the option that fits this definition, as it covers only in the cases of accidental death or severe injury leading to dismemberment.
Step-by-step explanation:
A limited policy in insurance typically refers to coverage that is restricted to specific events or circumstances and often pays only a set amount rather than covering all associated costs. Given the options provided:
- Long-term care insurance generally provides coverage over an extended period for services that assist individuals with activities of daily living, thus it is not considered limited in the sense of coverage scope.
- Accidental death and dismemberment (AD&D) insurance is more in line with the concept of a limited policy as it only pays out in specific instances of accidental death or severe injury that leads to dismemberment.
- A flat-benefit disability policy may offer a specific, predetermined benefit amount if the insured becomes disabled, but it is not limited to specific events or accidents, making it a more general form of disability coverage.
- A prescription drug plan typically helps cover the cost of prescription drugs, and it is not considered limited since it does not pay out a specific set amount for individual events or circumstances.
Given this context, the option that best fits the definition of a limited policy is B) Accidental death and dismemberment (AD&D) insurance, as it only provides coverage for very specific and narrow circumstances.