Ch. 18 Quiz Policy Provisions

27. The insuring clause does all of the following EXCEPT A. describe the insured B. describe the general scope of coverage C. provide any definitions required D. set forth the conditions under which benefits will be paid

A. Describe the insured. Insuring Clause -Usually the initial policy clause. it represents the insurers promise to pay under the conditions stipulated in the policy. The insuring clause perform these functions: - Describes the general scope of coverage - Provides an definitions required - Sets forth the conditions under which benefits will be paid. This clause is often viewed as the foundation of a health policy in terms of the insurers general agreement to provide coverage

19. Which of the following is NOT a required provision under the Uniform Provisions Model Act? A. Grace period B. Change of occupation C. Time of payment of claims D. Proof of loss

B. Change of Occupation Required 1. Entire Contract 2. Time Limit on Certain Defenses (incontestability) 3. Grace Period 4. Reinstatement 5. Notice of Claim 6. Claim Forms 7. Proof of Loss 8. Time of Payment of Claims 9. Payment of Claims 10. Physical Examination and Autopsy 11. Legal Actions 12. Change of Beneficiary

Exercise 18. A Match the number of days in a grace period with the premium mode. 1. 7 days 2. 10 days 3. 31 days

B. Weekly C. Monthly A. Annually

6. The insurer may generally require an autopsy at its own expense unless A. the deceased requests in writing that an autopsy not be performed B. the deceased's relatives request that an autopsy not be performed C. the deceased's relatives have proven religious objections to an autopsy being performed D. the state has an applicable law that forbids autopsy

D. The state has an applicable law that forbids autopsy

2. In most states, the policy becomes incontestable after A. 2 years B. 3 years C. 4 years D. 5 years

A. 2 years

Exercise 18. C Barbara had a terrible skiing accident resulting in a badly broken leg which required her to be hospitalized. She had an individual Hospital Expense policy that provided reimbursement for covered expenses. In accordance with the Mandatory Provisions of her policy, Barbara had __20__ days to give Notice of Claim. The insurer then had __15__ days to provide her with Claim Forms. She had a total of __90__ days after her accident to provide Proof of Loss. The Payment of Claims provision directs the insurer to pay the benefits to the __insured__ and the Time Payment of Claims provision tells them to pay_____Immediately______. If the insurer fails to pay her claim, Barbara may take Legal Action no sooner than _60___ days and no later than __3__ years after ling her Proof of Loss.

1. 20 days (Notice of Claim) 2. 15 days (Claim Form) 3. 90 days (Proof of Loss) 4. Insured (Payment of Claims) 5. Immediately (Time of Payment of Claims) 6. 60 days (Legal Action) 7. 3 years (Legal Action)

30. CeeCee's policy is guaranteed renewable. Which of the following may the insurer NOT do? A. Refuse to renew the policy if CeeCee fails to pay the premium B. Increase the premiums on all members of CeeCee's class C. Increase the premiums on CeeCee's policy only D. Refuse to renew the policy when CeeCee reaches a speci ed age

C. The insurer may not increase the premiums on CeeCees policy only. Guaranteed Renewable - Some policies the insurer relinquishes its rights to cancel at any time and to refuse renewal at a premium due date. - Renewal is guaranteed as long as the insured pays the premium - The insurer may not cancel unless the insured fails to pay the premium - Premiums may not be increased on an individual basis. - Premiums maybe increased on the basis of an entire classification, such as occupation - the guarantee to renew ends at a specified age. Nonpayment of premium is the only reason an insurer may cancel or refuse to renew a guaranteed renewable policy. Furthermore, the insurer is not permitted to increase the premiums on the basis of individual insureds experience. It may, however, increase the premiums on a class basis.

Exercise 18. B 1. A policy must automatically be considered reinstated by an insurer ___ days after submitting any required application and or premium 2. Coverage for sickness by a reinstated policy will begin after a waiting period of ____ days

1. 45 2. 10

16. Because the insurer needs time to respond to a claim, the law provides the insurer with a window during which the insured cannot sue to recover under a claim. This window lasts for A. 30 days B. 60 days C. 90 days D. 120 days

B. 60 days -When written proof of loss has been submitted, the company needs time to investigate the claim and make certain it is valid. To provide the insurer with this time, this provision prohibits the insured from suing the insurer for at least 60 days after filing a written proof of loss. The maximum time during which suit can be filed is three years after written proof of loss is furnished

15. If an insured is disabled for at least 2 years, the insurer may require proof of continuance of disability every A. month B. 2 months C. 6 months D. year

C. 6 months.

14. A reinstated policy will cover A. sickness immediately and accidents after 10 days B. both sickness and accidents after 10 days C. accidents after 10 days and sickness after 30 days D. accidents immediately and sickness after 10 days

D. A reinstated policy will cover accidents immediately and sickness after 10 days.

23. Cindy has a claim for $2,000 and a past due premium of $200. The insurer will A. refuse to pay the claim until the past due premium is paid B. pay the claim minus the past due premium C. pay the claim and forgive the past due premium D. pay the claim and bill Cindy for the past due premium

B. pay the claim minus the past due premium

3. All insurance policies may be canceled at any time by A. the insurer only B. the insured only C. neither the insurer or the insured D. neither the insurer nor the insured

B. The insured Only

9. If a policyholder has two or more policies from different companies that cover the same expenses and the insurers were not noticed that the other coverage existed, each insurer will A. have the option to cancel the policyholder's policy without notice B. have the option to cancel the policyholder's policy with appropriate notice C. pay the claim regardless, as long as the premiums have been paid D. pay a proportionate share of any claim

D. If a policyholder has two or more policies from different companies that cover the same expense and if the insurers were not notified that the other coverage existed, each insurer will pay a proportionate share of any claim.

20. Which of the following is an optional provision under the Uniform Provisions Model Act? A. Cancellation B. Physical examination and autopsy C. Legal actions D. Reinstatement

A. Cancellation is an optional provision under the Uniform Provisions Model Act. Optional Provisions 1. Change of Occupation 2. Misstatement of Age 3. Other Insurance with This insurer 4. Insurance with other Insurers 5. Relation of Earnings to Insurance - Average Earnings Clause 6. Unpaid Premium 7. Cancellation 8. Conformity with State Statutes 9. Illegal Occupation 10. Narcotics

12. The grace period varies according to A. premium payment frequency B. premium payment amount C. method of premium payment D. type of policy

A. The grace period is determined by the premium payment mode or frequency -"A grace period of __ days (the period varies according to premium payment frequency: 7 days for weekly premiums; 10 days for monthly premiums; 31 ays for all other policies) will be grated for the payment of each premium falling due after the first premium, during which grace period the policy shall continue in force."

7. When Betty purchased her insurance policy, her age was recorded as 32 when she was actually 34. Assuming her policy includes the misstatement of age provision and the insurance company discovers this 4 years later, Betty's policy A. will be canceled for misrepresentation B. will be unchanged because the incontestable period has expired C. limits will be lowered D. limits will be raised

C. Because her age was understated, her limits will be lowered.

21. Julia worked as a race car driver until recently, when she took a job in the promotions office handling media inquiries. If she has the same health insurance, her premiums are likely to A. stay the same B. goup C. go down D. stop because the policy will be canceled

C. Her premiums are likely to go down because of a change of occupation provision.

24. If Lois cancels her health insurance policy, the insurer will issue A. a pro rata re fund of all of the unearned premium B. a pro rata refund of most of the unearned premium C. a short-rate refund of all of the unearned premium D. a short-rate refund of most of the unearned premium

D. A short - rate refund of most of the unearned premium. - When the insured cancels, the insurance company is allowed to retain a portion of premium over and above that which it has earned. So the insurer keeps earned premium and a portion of unearned premium, returning the balance of unearned premium to the insured. This is a short rate return.

32. Which of the following statements is TRUE? A. An exclusion is a provision that eliminates coverage for a specified condition; a reduction is a provision that decreases benefits as a result of a specified condition. B. A reduction is a provision that eliminates coverage for a speci ed condition; an exclusion is a provision that decreases bene ts as a result of a speci ed condition. C. A reduction is a provision that eliminates coverage for a speci ed condition; an exception is a provision that decreases bene ts as a result of a speci ed condition. D. A reduction is another term for an exception.

A. An exclusion is a provision that eliminates coverage for a specified condition; a reduction isa provision that decreases benefits as a result of a specified condition. Exclusion & Reduction -is a provision that entirely eliminates coverage for a specified risk. A reduction is a decrease in benefits as result of specified conditions. - Benefits will not be provided if the cause of loss is due to military service, a war or civil dis order, a self inflicted injury such as an attempted suicide, or if the loss is due to aviation as a pilot. Generally coverage is temporarily suspended if an individual resides in a. foreign country for a specified period of time and reinstated when the insured returns to the United States or no longer is serving in the military.

18. A revocable beneficiary A. has the right to refuse assignment of the policy B. may stop the policyowner from disposing of the policy C. may be changed without the beneficiary's consent D. is assigned for life

C. A revocable beneficiary may be changed without the benficarys consent.

17. The maximum time during which suit can be led is how many years after written proof of loss is furnished? A. 1 B. 2 C. 3 D. 4

C. The maximum time during which suit can be filed is 3 years after written proof of loss is furnished.

22. Joe took out a disability policy while working as a very successful stockbroker. A few years later, he decides to take a less stressful job at a not-for- profit organization, writing about financial issues. He loves his new job and doesn't mind the fact that he makes a lot less money. When he becomes disabled 3 years later, his disability benefit is more than he has made in salary in 3 years. If the policy contains an average earnings clause, Joe's benefit will be A. the same as listed in the policy B. the lesser of Joe's monthly earnings at the time the disability started, or the average monthly earnings for the period of 2 years immediately preceding his disability C. the greater of Joe's monthly earnings at the time the disability started, or the average monthly earnings for the period of 2 years immediately preceding his disability D. the greater of Joe's monthly earnings at the time the disability started, or the average monthly earnings for the period of 2 years immediately preceding his disability. In addition, the insurer will return some of the excess premiums that paid for the bene t Joe is not eligible to receive.

D. the greater of Joe's monthly earnings at the time the disability started, or the average monthly earnings for the period of 2 years immediately preceding his disability. In addition, the insurer will return some of the excess premiums that paid for the benefit Joe is not eligible to receive. - This provision specifically concerns loss of time, or disability income coverages Designed to prevent malingering - remaining disabled in order to collect insurance. The provision specifically addresses the relationship between what the insured actually has been earning on the job and the amount of insurance available by failing to return to work. The illustration gives an example of how insurance might pay more than the insured earns. According to this provision, if the total monthly benefits from all policies are more than the insureds monthly income, each insurer will pya a proportionate share of the loss income. Because the insured paid for more coverage than can be collected, each company must refund a proportionate share of the excess premium.

11. A pro rata return is one in which the insurer returns A. all of the unearned premium B. some of the unearned premium C. both earned and unearned premium D. neither earned nor unearned premium

A. A pro rata return is one in which the insurer returns all of the unearned premium. - When a policy is canceled before is expiration date, some of the prepaid premium is unearned - that is, the insurance company has not yet earned the premium because the period of time it was intended to cover has not yet passed. The way in which unearned premium is returned to the insured depends on who canceled the policy: the insurance company or the insured. - When the insurance company cancels, the portion of the premium dollar the insurer has already earned is kept by the insurer and the entire unearned portion is returned to the insured. this is a pro rata return. - When the insured cancels, the insurance company is allowed to retain a portion of premium over and above that which it has earned. So the insurer keeps earned premium and a portion of unearned premium, returning the balance of unearned premium to the insured. This is a short rate return.

31. George has a noncancelable policy. Which of the following may the insurer do? A. Cancel the policy if George fails to pay premiums B. Increase the premiums on all members of George's class C. Increase the premiums on George's policy only D. Cancel the policy if the insurer chooses no longer to do business in George's state

A. Cancel the policy if George fails to pay premiums. Noncancelable Policy - Noncancelable and non cancelable and guaranteed renewable are often sued interchangeably to describe a non cancelable policy. An insurer may not cancel or refuse to renew a non cancelable policy. Although this appears to be the same as a guaranteed renewable policy, there is one important difference. With a guaranteed renewable policy, the insurer may increase the premiums by classifications. With a non cancelable policy, the insurer may only increase premiums based on the terms of the policy. Ex. a non cancelable policy would have to include a premium increase in the contract at the time it is issued.

1. According to the entire contract provision, the entire contract includes all of the following EXCEPT A. the insurance policy B. the premium payment C. any endorsements D. any attachments

B. The entire contract clause specifies what is included in the contract and that all parts must be in writing and attached. The premium is not part of the entire contract.

5. If there is no beneficiary listed on a policy, benefits will be paid to A. the state B. the insured's estate C. the insured's nearest blood relative D. the insured's nearest relative by marriage or blood

B. The insureds estate

8. The optional provisions that deal with multiple insurance policies of the same type on a single insured deal with the problem of A. underinsurance B. overinsurance C. inappropriate insurance D. incorrect insurance

B. The optimal provision that deal with multiple insurance policies of the same type on a single insured deal with the problem of overinsurance.

13. Mike allows his policy to lapse, then applies for reinstatement using the company's required application. The company does not inform Mike either that the policy has been accepted or that the policy is being rejected. At what point can Mike consider the policy reinstated? A. Not until the insurer noti es him that it has been reinstated B. As soon as the application has been submitted C. After 45 days D. After 90 days

C. 45 days Reinstatement -Part 1 of Provision - According to this part of the provision, with certain exceptions, a lapsed policy is reinstated when either the company or the company authorized agent accepts subsequent premiums. - However an application for reinstatement might be required, and a conditional receipt could be issued to the insured for any premium payment. The insurer will then generally notify the applicant whether or not the policy has been reinstated, but if the insurer does not so notify the applicant, the policy is automatically reinstated on the 45th day after the date of the receipt. Part 2 of Provision Once the policy is reinstated, there is: - a 10 day waiting period for sickness coverages - no waiting period for accident coverages.

29. Jennifer takes out an optionally renewable health policy with an annual premium due on June 14. The insurer decides it no longer wants to insure people with first names longer than five letters. The insurer may A. not cancel the policy because it does not have a good reason B. not cancel the policy unless the number of letters in the first name is a condition speci ed in the policy C. cancel the policy, but only on June 14 of the next year D. cancel the policy whenever it wants to

C. The insurer may cancel the policy but only on June 14 of the next year. Renewability Clause 1. Cancelable Polices 2. Optionally and Conditionally Renewable Policies 3. Guaranteed Renewable Policies 4. Non cancelable Policies 2. Optionally Renewable Health Policy -To remain in force, health policies must be renewed periodically, that is, the coverage remains in force only for the length of time for which premiums have been paid. Both the policy owner and the insurer have a role in the renewal process. - A policy owner has the option of cancelling a policy at any time by notifying the insurer, or of allowing it to lapse at a premium due date by not paying the premium. When the insurer has the option to refuse to renew, the policy may be one of two types: - Optionally Renewable : which means the insurer may elect not to renew for any reason or for no reason but may exercise that right only on the policy anniversary date or a premium due date. - Conditionally Renewably : Which means the insurer may elect not to renew only under conditions specified int he policy. Health status is not a condition used when' determining renewability.

25. Joel is hit by a car while crossing the street against the light. If Joel's policy contains the illegal occupation provision, the insurer A. is not liable for the claim because Joel was engaged in illegal activity at the time of the accident B. is not liable for the claim because Joel's illegal activity was the direct cause of the accident C. will pay the claim because crossing the street against the light is not a felony or a regular occupation D. may or may not pay the claim, depending on Joel's occupation

C. Will pay the claim because crossing the street against the light is not a felony or a regular occupation. - Illegal Occupation Provision -Most policies include the illegal occupation. "the insurer shall not be liable for any loss to which a contributing cause was the insureds commission of or attempt to commit a felony or to which a contributing cause was the insureds being engaged in an illegal occupation"

26. Carmen gets her health insurance policy on May 1, and on May 3 she decides she doesn't want it and returns it to the company. On May 6, she is hit by a car. The company will A. pay any resulting claim because she was injured within the 10-day free-look period B. pay any resulting claim only if the premium has not yet been returned to Carmen C. pay any resulting claim minus the amount of the returned premium D. only return any premium Carmen has paid and not any resulting claim

D. only return any premium Carmen has paid and not any resulting claim.

28. Consideration for a health policy includes A. the premium only B. the statements made in the application only C. the statements made in the application and the insuring clause D. the statements made in the application and the premium

D. Consideration for a health policy includes the statements made in the application and the premium. Consideration Clause - Consideration is an exchange of something of value on which a contract is based. When both parties exchange consideration, the contract is validated. In health insurance, the insurance company exchanges the promises in the policy for a two part consideration from the insured. A health insurance contract is valid only if the insured provides consideration in the form of: - The full minimum premium required - The statements made in the application In health policies, the consideration clause not only defines consideration but also states: - the date coverage begins - the length of the initial coverage period.

10. If a policy includes the provision on conformity with state statutes, and the state changes the law to be in conflict with another provision of the policy A. the policy will automatically be void B. the provision will be automatically grandfathered and able to stay the same C. the insurer will be able to apply for a grandfather provision for those policies already in force D. the provision will automatically be amended to conform to the minimum requirement of the statutes

D. The provision will automatically be amended to conform to the minimum requirements of the statutes. - The provision applies to the laws of the insureds state of residence.e Not only does the provision help insurers avoid issuing policies that conflict with existing state laws, it also can prevent reissuing polices that are in conflict with any ruling enacted during the time a policy is being or is about to be issued.

4. Normally, written proofs of loss must be furnished within how many days after the loss? A. 15 B. 45 C. 60 D. 90

D. The written proof of loss must be furnished within 90 days of the date of loss. -Filing a proof of loss when benefits are paid periodically vs. filing proof for a one time, non periodic loss as provided in the provision. 1. Receives periodic payments of disability income from May 1 through October 11th. - Must file proofs of loss within 90 days after October 11- the date the insureds liability for payment has ended. 2. Submits a claim for hospital expense after an accident at home on April 25. - Must file proofs of loss within 90 days after April 25 - the date of the loss since no periodic benefits are involved. AKA Written proofs of loss must be furnished within 90 days after the date of loss. However, when the claim involves periodic payments because of a continuing loss, proofs must be furnished within 90 days after the end of the period for which the company is liable. - If it was not reasonably possible for the insured to provide proofs of loss within the time required, the claim is not invalidated. Nevertheless, unless the insured suffers legal incapacity, proofs of loss must be furnished no later than one yea from the date they were otherwise due.