Unit 14 Quiz

Which of the following terms relates directly to the consideration clause? A) Endorsement B) Premium C) Exclusion D) Beneficiary

Premium Explanation The consideration clause describes the amount and frequency of the premium payments.

Under the time of payment of claims provision, policies that provide for periodic payment of benefits (such as disability income policies) must pay these benefits at least A) bimonthly B) monthly C) quarterly D) semiannually

monthly Explanation The time of payment of claims provision allows for immediate payment of the claim after the insurer receives notification and a proof of loss. If the policy provides for periodic payment of benefits (such as disability income policies), they must be paid at least monthly. The policy may specify that they be paid more frequently.

The entire contract in health insurance includes all of the following EXCEPT A) riders attached to the policy B) endorsements to the policy C) the policy itself D) the Buyer's Guide

the Buyer's Guide Explanation The entire contract in health insurance includes the policy itself, any endorsements to the policy, and any riders attached to the policy. It protects the policyowner by stating that nothing outside of the contract can be considered part of the contract. It also assures the policyowner that no changes will be made to the contract after it has been issued, even if the insurer makes policy changes that affect all policy sales in the future.

The entire contract of an individual health insurance policy includes all the following EXCEPT A) endorsements and waivers B) the application and waivers C) endorsements and riders D) the Buyer's Guide and any riders

the Buyer's Guide and any riders Explanation The entire contract includes the application, policy riders, waivers, and any other attached papers. It does not include the Buyer's Guide.

What kinds of risks does a health insurance policy cover during the 10-day waiting period after it has been reinstated? A) Neither accidents nor sickness B) Accidents and sickness C) Sickness D) Accidents

Accidents Explanation For the first 10 days after reinstatement, the reinstated policy covers only loss resulting from accidental injury. After 10 days, it must cover loss resulting from sickness as well.

Which of the following statements regarding reinstatement of a sickness and accident insurance policy is NOT correct? A) If an application is required, the policy is automatically reinstated 45 days after the application is submitted so long as the application is not approved or disapproved before that time. B) A reinstated policy only covers loss due to sickness for the first 10 days. C) The reinstatement provision must be included in every sickness and accident insurance policy. D) The insurer's acceptance of a late premium without requiring a reinstatement application constitutes automatic reinstatement.

A reinstated policy only covers loss due to sickness for the first 10 days. Explanation A reinstated policy covers only loss due to accidental injury for the first 10 days after reinstatement, after which it covers loss from sickness as well.

The time of payment of claims provision requires that A) claims must be paid after the insurer is notified and receives the proof of loss B) the insured must periodically submit proofs of loss in order to receive the claim C) the insured must submit the proof of loss within a specified time, or the claim may be denied D) claims must be paid after the insurer is notified of a loss

claims must be paid after the insurer is notified and receives the proof of loss Explanation The time of payment of claims provision provides for immediate payment of the claim after the insurer receives notification and the proof of loss.

Which of the following statements regarding proofs of loss is CORRECT? A) The insurer must file a proof of loss within 90 days of the date of loss. B) The insured must file a proof of loss within 90 days of the receipt of claims forms. C) The insured must file a proof of loss within 90 days of the date of loss. D) The insurer must file a proof of loss within 90 days of the receipt of claim forms.

The insured must file a proof of loss within 90 days of the date of loss. Explanation Under a health insurance policy, the insured has 90 days from the date of the loss to file a proof of loss with the insurer. Failure to file this within 90 days does not invalidate a claim as long as the proof of loss is furnished as soon as reasonably possible. With the exception of the absence of legal capacity, a proof of loss is required no later than 1 year from the date of loss.

Which of the following statements regarding a conditionally renewable policy is NOT correct? A) The insured has the conditional right to renew the policy up to a given date. B) The insurer may refuse to renew the contract as the result of the insured's retirement. C) The insured has the conditional right to renew the policy up to a given age. D) The insurer may refuse to renew the contract as the result of the insured's deteriorating health.

The insurer may refuse to renew the contract as the result of the insured's deteriorating health. Explanation Although an insurer may refuse to renew the policy as the result of specific circumstances (such as the insured's retirement), it may not refuse renewal as the result of the insured's deteriorating health.

An individual accident and health insurance policy must contain all of the following EXCEPT A) a 21-day grace period B) a change of beneficiary provision C) a reinstatement provision D) the amount of policy premiums

a 21-day grace period Explanation Individual accident and health policies must grant at least a 7-day grace period for weekly premium policies, 10 days for monthly premium policies, and 31 days for all other policies.

An accident and health insurance policy may not be rescinded, except for fraud, after it has been in effect for A) 2 years B) 4 years C) 1 year D) 6 months

2 years Explanation After an accident and health insurance policy has been in force for 2 years, the insurer may not rescind it unless the insured obtained the coverage through fraud or fails to pay the premium.

Keenan has coverage with two separate insurers that provide similar benefits. If he has a loss, A) the claim will be declined by one insurer and covered by the other. B) Keenan will need to pay an additional premium to both insurers. C) the amount paid by the two insurers will be prorated and Keenan's policy will be cancelled by the insurer with the next renewal date. D) the amount paid by the two insurers will be prorated and Keenan will be refunded any excess premium.

the amount paid by the two insurers will be prorated and Keenan will be refunded any excess premium. Explanation Under the "Insurance with Other Insurers" optional health provision, if the insured has coverage with two insurance companies and suffers a covered loss, the claim will be paid. However, the amount will be prorated and any excess premium will be refunded to the insured.

Naomi is killed in an auto accident before she is able to pay the semiannual $80 premium on her $30,000 accident policy. Under the policy's unpaid premium provision, her beneficiary will receive a check for A) 29920 B) 0 C) 29840 D) 30000

29920 Explanation Under a health insurance policy's unpaid premium provision, any due and unpaid premium (in this case, $80) is deducted from the settlement amount ($30,000). Therefore, Naomi's beneficiary will receive a check for $29,920.

What accident and health insurance renewability clause provides that the insurer cannot unilaterally change any provision while the policy is in force but can change premium rates by class? A) Provisional B) Guaranteed renewable C) Transitional D) Noncancelable

Guaranteed renewable Explanation An insurer cannot unilaterally change a guaranteed renewable accident and health insurance policy while the policy is in force. Nevertheless, it can change premium rates by class.

Identify the number of days the insured or insurer must do the following in this order: Notice of Claim, Claims Forms, Proof of Loss, Waiting Period for Sickness Claims upon Reinstatement. A) 10, 90, 15, 20 B) 20, 15, 90, 10 C) 10, 20, 15, 90 D) 15, 20, 10, 90

20, 15, 90, 10 Explanation Notice of Claim must be filed within 20 days. Claims forms must be provided to the insured within 15 days. The insured has 90 days to file Proof of Loss, and sickness claims are covered 10 days after reinstatement of a policy.

Under the standard cancellation provision, an insurance company has the right to cancel a policy at any time with how many days' written notice to the insured? A) 60 days B) 30 days C) 15 days D) 5 days

5 days Explanation Under the standard cancellation provision, the insurance company has the right to cancel the policy at any time with 5 days' written notice to the insured. This provision is prohibited in many states.

An individual health insurance policyholder can change the beneficiary of the policy under what circumstances? A) Beneficiaries can never be changed. B) The policyholder must pay a $500 transfer fee. C) The change can be made without the beneficiary's consent, unless the original designation is irrevocable. D) The change must be submitted to the insurance company's approval board.

The change can be made without the beneficiary's consent, unless the original designation is irrevocable. Explanation The choice of beneficiary is a policyholder right. Therefore, the policyholder can change the beneficiary without the consent of the beneficiary or insurer unless the original designation is irrevocable.

Under the optional illegal occupation provision, which of the following applies if a loss occurs while the insured is participating in a felony or an illegal occupation? A) The insurer is not liable for that specific loss. B) Benefits are reduced by an amount specified in the policy. C) The policy is voided, as if it were never issued. D) The insured's policy is automatically canceled.

The insurer is not liable for that specific loss. Explanation Under the optional illegal occupation provision, the insurer is not liable for any loss sustained from the insured's commission of a felony or engagement in an illegal occupation.

Under the relation of earnings to insurance provision, the insured's benefit A) cannot exceed earnings B) must equal earnings C) must equal annual earnings D) must equal average earnings

cannot exceed earnings Explanation If the insured's total disability income benefit exceeds the greater of the insured's earnings at the time of the disability or the insured's average monthly earnings for the past 2 years, the benefit is reduced accordingly and the premium paid for excess coverage is refunded to the insured.

When it is used, the time limit on the certain defenses provision in a health insurance policy provides that the policy cannot be contested and claims cannot be denied after 2 (or 3) years EXCEPT A) for incomplete policy records B) for nonpayment of premiums C) for mental incompetence of the insured D) for fraudulent statements in the application

for fraudulent statements in the application Explanation According to the time limit on the certain defenses provision, also known as the incontestability clause, a policy cannot be contested until after 2 (or 3) years from the date of policy issue for misstatements. A fraudulent misstatement on a health insurance application is grounds for contest at any time.

Insured losses are covered immediately after a health policy is reinstated when A) a change of occupation provision B) hospitalization is required C) all back premiums have been paid D) the losses result from accidental injuries

the losses result from accidental injuries Explanation Insured losses are covered immediately after a health policy is reinstated when the losses result from accidental injuries. Insured losses from sickness will not be covered unless they occur at least 10 days after reinstatement. This is to prevent adverse selection against the insurer.

An individual may take legal action to recover on an accident and health insurance policy no sooner than how many days after a written proof of loss is provided? A) 30 days B) 20 days C) 60 days D) 50 days

60 days Explanation Accident and health insurance policies must contain a legal action provision stating that legal actions to recover on a policy can begin no sooner than 60 days and no later than 3 years after a written proof of loss is furnished.

Under the misstatement of age provision in a health insurance policy, what can an insurer do if it discovers that an insured gave a wrong age at the time of application? A) Increase the premium B) Assess a penalty C) Adjust the benefits D) Cancel the policy

Adjust the benefits Explanation Under the misstatement of age provision in a health insurance policy, if an insurer discovers that an insured gave a wrong age at the time of application, it can adjust the benefits. Benefit amounts payable in these cases will be what the premiums paid would have purchased at the correct age.

Which of the following renewability provisions is the least favorable provision for the insured? A) Optionally renewable B) Noncancelable C) Conditionally renewable D) Guaranteed renewable

Optionally renewable Explanation The least favorable provision for an insured (other than a cancelable policy), is a policy that is optionally renewable. This means the insurer has the option to renew or not renew the policy for any reason on a premium due date or anniversary. Premiums may be increased on the policy anniversary for a class of insureds.

Which of the following statements about the grace period and reinstatement provisions in a health insurance policy is NOT correct? A) Craig's health policy has a grace period of 31 days. He had a premium due June 15, while he was on vacation. He returned home July 7 and mailed his premium the next day. The insurer received it July 10. His policy would have remained in force. B) Warren's medical expense policy was reinstated on September 30. He became ill and entered the hospital on October 5. His hospital expense will not be paid by the insurer. C) Gillian submits a reinstatement application and delinquent premiums to her insurance company on May 1. If the company has not sent a notice declining coverage by June 16, her coverage will automatically be reinstated. D) Under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement.

Under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement. Explanation A policy that has lapsed may be reinstated. However, to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date. Losses due to accidental injury are covered immediately upon reinstatement of the policy. The other answer choices are correct statements.

Changes made to a policy must be A) approved in writing by the insured, agent and executive officer of the insurance company. B) approved in writing by the insured and initialed by one of the insurer's executive officers. C) approved in writing by the insured and initialed by the agent. D) approved in writing by an executive officer of the insurance company.

approved in writing by an executive officer of the insurance company. Explanation Under the "entire contract" provision, any changes made to the policy must be approved in writing by an executive officer of the insurance company and attached to the policy in the form of an amendment.

Individual accident and health insurance policies must contain all of the following provisions EXCEPT A) time limit on certain defenses provision B) proof of loss provision C) change of occupation provision D) change of beneficiary provision

change of occupation provision Explanation Individual accident and health insurance policies must contain change of beneficiary, proof of loss, and time limit on certain defenses provisions. A change of occupation provision is optional.

KAC Health Insurance Company insures a risk without being notified that the insured already has existing coverage for the same risk. The policy that KAC issued contains the insurance with other insurers provision. When a loss occurs, the total coverage that the insured had purchased (including the coverage that KAC was unaware of at the time of application) would pay $5,000. Had KAC been the only insurer, it would have paid $2,500. What amount is KAC liable to pay? A) 1250 B) 2500 C) 1750 D) 0

1250 Explanation According to the insurance with other insurers provision, benefits payable for expenses incurred are prorated if the insurer accepted the risk without being notified of other existing coverage for the same risk. The insurer is only liable to pay pro rata benefits in proportion to the amount of insurance with the insurer as it relates to the total amount of insurance under all policies. As a result, if KAC's policy would have paid a total of $2,500 for the claim and the benefit payable under all coverages totals $5,000, KAC must pay only half of the amount it would have otherwise paid (or $1,250).

The right to examine, or free-look, provision in a long-term care policy allows for an insured to return a policy within how many days for a full refund of premiums paid? A) 30 days B) 15 days C) 10 days D) 20 days

30 days Explanation When a policy is delivered to an insured, she has a right to examine it and decide to keep it or return it. If a policy is returned during the free-look period, the company earns no premium and must return all premiums paid. The standard free-look period in health insurance contracts is 10 days, but it is 30 days for Medicare supplement policies and long-term care insurance.

Claire had back surgery in May and in September her doctor informs her that she will need to undergo several more surgeries within the next two years. Since her injury is considered a continuing disability, how often will Claire need to provide Notice of Claim to the insurer? A) 6 months B) 3 months C) 30 days D) 45 days

6 months Explanation If a disability is expected to last for at least two years, the insured will be required to give Notice of Claim to the insurer once every six months of the continuance of the disability, except in the case of legal incapacity.

Which of the following statements pertaining to notice of claim and claim forms provisions in health insurance policies is NOT correct? A) Furnishing claim forms is the responsibility of the insurance company. B) Charlotte is injured on January 5. Later, she wishes to file a policy claim for expenses incurred in connection with the injury. Generally, she would be required to submit a notice of claim to the company by February 5. C) Rex, the insured in a disability income policy, has been totally disabled and receiving benefits for 25 months. The notice of claim provision in his policy requires that he submit a proof of loss every 6 months. D) Gail submits a notice of claim to her insurance company after she becomes totally disabled. The company must supply a claim form to her within 15 days.

Charlotte is injured on January 5. Later, she wishes to file a policy claim for expenses incurred in connection with the injury. Generally, she would be required to submit a notice of claim to the company by February 5. Explanation Generally, a claimant must notify the insurance company within 20 days of an accident under a health insurance policy. A proof of loss must be submitted within 90 days of the loss, but if it is not reasonably possible for the insured to do so, the deadline will be extended to 1 year. The company must supply its claim forms to the insured within 15 days of receiving the notice of claim.

Which kind of health insurance policy ensures renewability up to a specific age of the insured, although the insurer reserves the right to change the premium rate on a class basis? A) Noncancelable B) Optionally renewable C) Cancelable D) Guaranteed renewable

Guaranteed renewable Explanation Guaranteed renewable health insurance policies ensure renewability up to a specific age of the insured, although the insurer reserves the right to change the premium rate on a class basis.

Luis has 3 individual health insurance policies and is concerned that the benefits may overlap. What will happen in the event he makes a claim for coverage under all 3 policies? A) If 1 insurer covers the risk, it will pay the claim and any premiums that apply to any excess will be returned to Luis. B) If 2 or more insurers cover the same risk, there is a presumption of fraud. All policies will be canceled and all premiums will be refunded. C) If 2 insurers cover the same risk, they will divide claims equally and refund any excess premiums to Luis. D) If the claim is made after the policies have been in force for at least 2 years, the insurer is obligated to pay all claims and pay any excess premiums directly to Luis or his beneficiary, regardless of the number of insurers covering the risk.

If 1 insurer covers the risk, it will pay the claim and any premiums that apply to any excess will be returned to Luis. Explanation Regardless of the number of insurers involved or how long the policies have been in force; the insurers will refund excess premiums to the insured. If 1 insurer covers the risk, the insurer will either pay up to a specified maximum or pay benefits under the policy elected by the insured. The payment that applies will be determined by the other insurance with this insurer provision that is included in the insurer's policy. If 2 insurers cover the risk, benefits will be prorated. They will not be divided equally.

Which of the following statements pertaining to the optional misstatement of age provision is NOT correct? A) If the age of the insured is misstated at the time of application, all amounts payable under the policy would be what the premiums paid would have purchased at the correct age. B) If the insured actually was older at the time of application than shown in the policy, benefits would be reduced. C) If the insured actually was older at the time of application than shown in the policy, the excess premiums paid would be refunded. D) If the insured actually was younger at the time of application than shown in the policy, benefits would be increased.

If the insured actually was older at the time of application than shown in the policy, the excess premiums paid would be refunded. Explanation According to the optional misstatement of age provision, if the insured was actually older at the time of application than shown in the policy, benefits would be reduced accordingly.

Thomas, an insured, submits a claim and a proof of loss for medical expenses covered by his major medical policy. According to the time of payment of claims provision, how soon must the company pay the claim? A) Within 30 days B) Immediately C) Within 150 days D) Within 90 days

Immediately Explanation According to the time payment of claims provision of a major medical policy, the company must pay the claim immediately.

How does an insurer treat benefits that are payable for expenses incurred when the company accepted the risk without being notified of other existing coverage for the same risk? A) It eliminates them. B) It prorates them. C) It estimates them. D) It deducts them.

It prorates them. Explanation Benefits payable for expenses incurred are prorated in cases where the company accepted the risk without being notified of other existing coverage. This limits overinsurance and is known as the insurance with other insurers provision.

Which of the following statements concerning the free-look provision is NOT correct? A) It permits policyowners to return their policies within a specified time and receive full premium refunds. B) A policyowner does not need to give any reason for returning a policy in accordance with the provision. C) Most states require a 45-day free-look provision in health insurance policies. D) Most states require a free-look provision in health insurance policies.

Most states require a 45-day free-look provision in health insurance policies. Explanation Most health insurance policies contain a 10-day free-look provision. The common exception is Medicare supplement policies, which are required by state law to allow a 30-day free-look period.

Which of the following types of health insurance policies prevents the insurer from changing the premium rate or modifying the coverage in any way? A) Cancelable B) Noncancelable C) Guaranteed renewable D) Optionally renewable

Noncancelable Explanation Noncancelable health insurance policies prevent the insurer from changing the premium rate or modifying the coverage in any way.

Which of the following is the best example of overinsurance? A) The client's hospital bills total $1,000 a day. His 3 health insurance policies pay $900 a day. B) The client's income is $4,000 a month. He becomes disabled. His individual disability policy provides a flat benefit of $1,200, and his Social Security benefit is $1,000. C) The client earns $1,500 a month and becomes disabled on the job. He is eligible for $800 a month from workers' compensation and $850 from Social Security. D) The client's hospital bill comes to $1,300 a day. His major medical plan pays $1,000, whereas his hospital indemnity plan pays $400.

The client's hospital bill comes to $1,300 a day. His major medical plan pays $1,000, whereas his hospital indemnity plan pays $400. Explanation In the first choice, the client would receive benefits in excess of actual costs. With a disability policy, the total benefit cannot exceed 60% of the client's income. Additionally, his benefit may be reduced by his Social Security benefits, which is also the case when workers' compensation is involved.

Regarding the consideration clause, which of the following statements is INCORRECT? A) The insurer's consideration is its promise to pay benefits. B) The consideration given by the insured is the promise to pay the premiums. C) Consideration is a necessary element of a legal contract. D) The consideration given by the insured are the statements made in the application.

The consideration given by the insured is the promise to pay the premiums. Explanation The consideration given by the insured are the statements made in the application and the payment of premium, but not the promise to pay premiums. The insured may stop paying premiums at any time. On the other hand, in exchange for the application and premium, the insurer promises to pay benefits and/or covered claims. Keep in mind that when the insured stops paying premiums, there is no longer consideration - the exchange of value, and therefore the insurer no longer has the obligation to pay benefits.

Which of the following statements characterizes a cancelable policy? A) The insurer may not cancel the policy because of the insured's age. B) The insurer may cancel the policy only at the end of the term. C) The insurer may not cancel the policy because of the insured's retirement. D) The insurer may cancel the policy at any time.

The insurer may cancel the policy at any time. Explanation An insurer may cancel a cancelable policy at any time and for any reason. Clearly, this type of policy is most advantageous to the insurer, not the insured.

Which of the following statements pertaining to provisions in health insurance policies is CORRECT? A) The misstatement of age provision allows the insurer to adjust the benefits payable under the policy if the age of the insured was misstated in the policy application. B) The physical exam and autopsy provision entitles an insurance company, at the insured's expense, to conduct physical exams of the insured during a claim period. C) The legal action provision prohibits the insurer from taking legal action against the insured in a claim dispute until 60 days from the time the claim was filed. D) The change of occupation provision describes the changes the insured must make at her job to remain in compliance with the terms of a health or accident policy.

The misstatement of age provision allows the insurer to adjust the benefits payable under the policy if the age of the insured was misstated in the policy application. Explanation Physical exams are conducted at the insurer's expense. The change of occupation provision describes changes that may be made to premium rates or benefits if the insured changes jobs. The legal action provision prevents the insured from taking legal action against the insurer any sooner than 60 days from the date the claim was filed.

The insurer under a health policy is liable for which of the following losses? A) Those sustained while under the influence of alcohol B) Those sustained while under the influence of a prescribed medication C) Those sustained while committing a felony D) Those sustained while under the influence of an illegal narcotic

Those sustained while under the influence of a prescribed medication Explanation Under a health insurance policy, the insurer is not liable for any loss attributable to the insured while under the influence of intoxicants, drugs, or narcotics (unless the drugs were administered on the advice of a physician) or sustained while committing a felony.

Which of the following statements pertaining to the grace period and reinstatement provisions in health insurance policies is NOT correct? A) Warren's medical expense policy was reinstated on September 30. He became ill and entered the hospital on October 5. His hospital expense will not be paid by the insurer. B) Under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement. C) Craig's health policy has a grace period of 31 days. He had a premium come due June 15 while he was on vacation. He returned home July 7 and mailed his premium the next day. His policy remained in force. D) States may require grace periods of 7, 10, or 31 days, depending on the mode of premium payment or term of insurance.

Under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement. Explanation Under a health insurance policy's reinstatement terms, insured losses from sickness will not be covered unless they occur at least 10 days after reinstatement. This is to prevent adverse selection against the insurer. Accidental injuries, however, are covered immediately.

All of the following are required uniform provisions in an individual health insurance policy EXCEPT A) change of occupation B) grace period C) reinstatement D) entire contract

change of occupation Explanation The grace period, entire contract, and reinstatement provisions are mandatory uniform provisions. The change of occupation provision sets forth the changes that may be made to premium rates or benefits payable if the insured changes occupations. This is an optional provision.

The time of payment of claims provision in an accident and health insurance policy requires that A) the insurer must furnish the insured with the forms required for filing a proof of loss B) claims must be paid immediately after the insurer receives a written proof of loss C) the insured must submit the proof of loss within a specified time, or the claim may be denied D) the insured must periodically submit proofs of loss in order to receive payment of the claim

claims must be paid immediately after the insurer receives a written proof of loss Explanation In an accident and health insurance policy, the time of payment of claims provision provides for immediate payment of the claim after the insurer receives the written proof of loss. The claim forms provision states that the insurer, no later than 15 days after receiving the notice of claim, must furnish the claimant with the forms required for filing a proof of loss. The notice of claim provision requires that written notice be given to the insurer within 20 days after any loss.

All of the following are optional provisions in an individual health insurance policy EXCEPT A) change of occupation B) unpaid premiums C) misstatement of age D) legal actions

legal actions Explanation A legal actions provision, which states that no legal action will be entered into to recover on the policy earlier than 60 days or later than 3 years after a written proof of loss has been furnished, is mandatory in an individual health insurance policy. A misstatement of age provision, which states that if an insured's age has been misstated, any benefits will be paid based on the coverage the premium would have purchased at the correct age, is optional. Another optional provision is the change of occupation provision, which provides that if the insured is injured or becomes sick after changing to a more hazardous occupation, the insurer will pay only the portion of indemnity that the premium would have purchased at the rates for the more hazardous occupation. An unpaid premiums provision, which states that any unpaid premium or premium covered by a note or written order may be deducted from a claim payment, is also optional.

The optional other insurance in this insurer provision is specifically designed to A) restrict an insured's coverage to 1 type of accident and health insurance B) discount the premiums if more than 1 policy is issued to insure the same individual C) limit the risk with any 1 individual insured by the insurance company D) avoid issuing 2 policies on an insured person

limit the risk with any 1 individual insured by the insurance company Explanation The optional other insurance in this insurer provision is an overinsurance provision. It is designed to limit the insurance company's risk with any 1 individual insured. An important consideration in health insurance underwriting is avoiding issuing a policy that provides too high a benefit, which would be a disincentive to return to gainful employment. Therefore, this provision sets a limit on the total indemnity for a particular type of coverage.

At what point after the effective date of an accident and health insurance policy does it become incontestable? A) 18 months B) 3 years C) 2 years D) 1 year

2 years Explanation After an accident and health insurance policy has been in effect for 2 years, it cannot be canceled for any reason, other than nonpayment of premiums. No claim for loss or disability beginning after 2 years from the date of issue can be denied because of a disease or condition that existed before the date of coverage.

Patricia has a health insurance policy for which she pays a semiannual premium. If the premium is due on July 1, her grace period will end in A) 31 days B) 60 days C) 20 days D) 7 days

31 days Explanation A semiannual premium policy usually has a 31-day grace period in which the policyowner can pay the premium due. For policies with weekly premium payments, the grace period is 7 days, and policies with monthly premiums have 10-day grace periods.

What is the minimum grace period that an individual accident and health insurance policy must include, if the premiums are due weekly? A) 7 days B) 20 days C) 90 days D) 2 days

7 days Explanation All individual accident and health insurance policies must contain a grace period for the payment of overdue premiums, except for the first premium. The grace period is 7 days for weekly premium policies, 10 days for monthly premium policies, and 31 days for annual premium policies.

How many days from the date of loss does the insured have to submit a completed claim form to the insurer? A) 20 days B) 90 days C) 10 days D) 60 days

90 days Explanation All individual accident and health insurance policies must contain a proof of loss provision stating that the insured must furnish a completed claim form to the insurer within 90 days of the date of loss. Policies must also contain a time of payment of claims provision stating that indemnities payable under the policy for any loss will be paid immediately upon receipt of the written proof of loss.

An individual accident and health insurance policy must include which of the following provisions? A) A misstatement of age provision B) A provision limiting benefits if the insured has insurance with other insurers C) A change of occupation limitation D) A provision that the policy, including any endorsements or riders, constitutes the entire contract

A provision that the policy, including any endorsements or riders, constitutes the entire contract Explanation One of the 12 mandatory provisions for an individual accident and health insurance policy is the entire contract provision. This provision states that the policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. This would include any riders applicable to the policy.

Which of the following is a required policy provision? A) Change of occupation B) Change of beneficiary C) Insurance with other insurers D) Misstatement of age

Change of beneficiary Explanation Change of beneficiary is a required provision. The insured can change the beneficiary by signing a change form when the beneficiary is revocable. If the insured has named an irrevocable beneficiary, then the insured needs the written permission of the irrevocable beneficiary.

Joanie was injured in an automobile accident. She is now in a coma and expected to die. Under the terms of her individual accidental death and dismemberment (AD&D) policy, which of the following is CORRECT? A) Her daughter, who is the revocable beneficiary, can change the beneficiary to her father. B) The beneficiary cannot be changed. C) As her next of kin, her spouse can change the beneficiary from himself to their daughter. D) As her next of kin, her spouse would automatically receive the principal sum.

The beneficiary cannot be changed. Explanation The beneficiary designation cannot be changed without the approval of the policyowner. It makes no difference that Joanie's spouse is her next of kin or that her daughter is the revocable beneficiary.

Alberto falls from his ladder while hanging holiday lights around his house. He breaks his arm and files a claim for $3,100. His health insurance premium which is $310 is due at the end of the month and has not yet been paid. How much of the benefit will be paid, assuming no deductibles or coinsurance? A) 2970 B) 2800 C) 3000 D) 2790

2790 Explanation Under the optional "Unpaid Premium" provision, if a premium is due at the time a claim is made, the amount of the premium will be deducted from the total amount paid on the claim.

An accident and health policy whose premiums are paid on a quarterly basis must contain a grace period of at least A) 15 days B) 31 days C) 60 days D) 45 days

31 days Explanation Accident and health insurance policies must provide a grace period of 7 days for premiums paid weekly, 10 days for premiums paid monthly, and 31 days for all other premiums, such as those paid quarterly.

All of the following are mandatory health insurance policy provisions EXCEPT A) grace period B) entire contract C) reinstatement D) change of occupation

change of occupation Explanation Change of occupation is an optional provision.

The scope of an entire contract does NOT include A) a copy of the application B) riders C) premium computations D) policy provisions

premium computations Explanation The entire contract comprises the insurance policy provisions, a copy of the application, and any riders or attachments.

The required grace period for weekly premium health insurance policies is A) 31 days B) 10 days C) 14 days D) 7 days

7 days Explanation The grace period is 7 days for weekly premium policies, 10 days for monthly premium policies, and 31 days for all other premium policies.

In most states, all of the following are optional provisions in an accident and health insurance contract EXCEPT A) a change of occupation provision B) a misstatement of age provision C) an unpaid premium provision D) a reinstatement provision

a reinstatement provision Explanation A reinstatement provision is not optional in an accident and health insurance contract. It is a required provision. If a policyowner sends a lapsed policy's overdue premium to the insurer and the insurer does not formally decline acceptance of the premium within 45 days after the premium is mailed, acceptance of the premium (and thus reinstatement of the policy) is automatically granted.

Who is responsible for examination costs when required by the insurer? A) the insurer B) the agent of record C) the beneficiary D) the insured

the insurer Explanation Insurers have the right to request physical examinations or autopsies to be performed. They are also responsible for paying all costs if either are necessary.

Disability insurance policies must include a provision entitling policyholders to a grace period for premium payment. At least how long must the grace period be for monthly premium policies? A) 10 days B) 90 days C) 31 days D) 1 year

10 days Explanation A grace period for payment of the premium must allow at least 7 days for policies in which premiums are paid weekly, 10 days for those paid monthly, and 31 days for all other policies.

An accident and health insurance policy that provides for monthly payments has a grace period of: A) 10 days B) 31 days C) 14 days D) 7 days

10 days Explanation Each accident and health insurance policy must contain a grace period of at least 31 days if the premium is paid yearly, 10 days if the premium is paid monthly, and 7 days if the premium is paid weekly.

According to the disability insurance time limit on certain defenses provision, how long after the date of a policy's issue can innocent misstatements on an application be used to void a claim? A) 5 years B) For the life of the policy C) 1 year D) 2 years

2 years Explanation When a policy has been in effect for 2 years, the insurer may not void the policy or deny a claim on the basis of a misstatement on the application, in the absence of fraud.

All individual health insurance policies must include a notice of claim provision requiring that a written notice of claim must be given to the insurer within how long after the occurrence of the loss? A) 24 hours B) 20 days C) 5 days D) 10 days

20 days Explanation All individual health insurance policies must include a notice of claim provision. According to this provision, a written notice of claim must be given to the insurer within 20 days after a covered loss starts, or as soon as possible thereafter. The insurer must provide a claims form to the insured within 15 days of receiving a notice of claim. Failure to do so means that the insured may meet the time requirement for a proof of loss by giving the insurer a written statement verifying the loss.

After how many days is coverage is automatically reinstated if the insurer has not disapproved the application and notified the insured? A) 30 days B) 10 days C) 31 days D) 45 days

45 days Explanation Under the reinstatement provision, coverage is automatically reinstated after 45 days if an application has been submitted and the insurer has not disapproved the application and contacted the insured.

After a proof of loss is submitted, legal action may be taken to recover on an individual health insurance policy only during what time period? A) Between 30 days and 10 years B) Between 30 days and 1 year C) Between 60 days and 3 years D) Between 30 and 60 days

Between 60 days and 3 years Explanation The statute of limitations stipulates that lawsuits may not be initiated to recover on the policy for 60 days after a written proof of loss has been submitted to the insurer and that lawsuits may not be initiated beyond 3 years after the time the written proof of loss was required.

Trudy has been promoted from being a firefighter to working at a desk in the arson unit. How will this affect her health care according to the change of occupation provision? A) Her premium will be reduced and the insurer will decrease her benefits. B) Her premium will be increased and the insurer will increase her benefits. C) Her premium will be reduced and the insurer will return the excess pro-rata unearned premium to her. D) Her premium will be reduced and the insurer will increase her benefits since her job is less hazardous.

Her premium will be reduced and the insurer will return the excess pro-rata unearned premium to her. Explanation Under the "Change of Occupation" provision, if an insured moves to an occupation that is classified as less hazardous, the insurer will reduce the premium rate accordingly and return the excess pro-rate unearned premium to the insured.

Which of the following statements does NOT apply to the insuring clause? A) It usually specifies that the benefits are subject to all provisions and terms stated in the policy. B) It represents the insurer's promise to pay benefits for specific kinds of losses. C) It defines losses not covered by the policy. D) It identifies the insured and the insurer.

It defines losses not covered by the policy. Explanation Losses not covered by the policy would be listed as exclusions.

Which of the following statements about reinstated health insurance policies is CORRECT? A) They only cover accidents that occur more than 1 month after reinstatement. B) Health insurance policies cannot be reinstated. C) Coverage for accidents and sickness begins immediately. D) They only cover illnesses that began more than 10 days after the policy is reinstated.

They only cover illnesses that began more than 10 days after the policy is reinstated. Explanation All individual accident and health insurance policies must contain a reinstatement provision stating that any lapsed policy can be put back in force if payment is accepted by the insurer. The reinstated policy will only cover accidents that happen after the policy is reinstated and loss caused by sickness beginning more than 10 days after the reinstated policy is accepted.

Which of the following provisions is optional in an individual health insurance policy? A) Grace period B) Unpaid premium C) Entire contract D) Change of beneficiary

Unpaid premium Explanation All individual health insurance policies must contain an entire contract provision stating that the policy, including the endorsements and attached papers, constitutes the entire insurance contract. Individual policies must also contain a grace period of at least 7 days for weekly premium policies, 10 days for monthly premium policies, or 31 days for all other policies for payment of each premium after the first. A change of beneficiary provision, which states that the insured has the right to change the beneficiary unless an irrevocable beneficiary designation has been made, is also mandatory. However, an unpaid premiums provision is optional and states that when a claim is paid, any premium due may be deducted from the payment.

At the time the policy was applied for, to the best of her knowledge Mary answered all of the questions on her individual health insurance application truthfully. Two and a half years later she is diagnosed with cancer. Is her insurer obligated to cover her expenses? A) Yes, as long as Mary did not make any fraudulent misstatements and this condition was not excluded from coverage. B) No, because she most likely had the cancer when she completed the application, even if she didn't know it at the time. C) Yes, if she can prove she developed the cancer after she signed the application. D) No, because she must have known there was something wrong with her health when she signed the application.

Yes, as long as Mary did not make any fraudulent misstatements and this condition was not excluded from coverage. Explanation Even though the cancer could have existed before the effective date of the policy, this policy has now been in force beyond the 2-year incontestability period. As long as Mary did not make any fraudulent statements, and cancer was not excluded at the time of issue, the insurer will be obligated to cover Mary's expenses.

All of the following are required provisions of accident and health insurance policies EXCEPT A) grace period B) reinstatement C) notice of claim D) inflation protection

inflation protection Explanation Inflation protection is a feature offered with long-term care insurance policies.

Any standard health insurance policy provision that is in conflict with a state statute A) is deleted entirely from the policy B) is kept in the policy verbatim, but with a rider added C) is automatically amended to conform to the state statute D) supersedes the statute and remains in force

is automatically amended to conform to the state statute Explanation In accordance with state regulation of the insurance industry, any health insurance policy provision that conflicts with state law is automatically amended to conform to the statute.

Maynard earns $70,000 a year. Under his disability income policy, the maximum amount of monthly benefit he will receive is $7,000 a month. Under the relation of earnings to insurance provision, his disability income benefit will be A) reduced, and all premiums paid to date will be considered earned premiums B) paid in full C) reduced, and he will be refunded for any premiums he paid for excess coverage D) prorated, and he will receive $7,000 a month for a limited time period

reduced, and he will be refunded for any premiums he paid for excess coverage Explanation Insurance companies require that there be a relationship between earnings and insurance. The benefit for coverage purchased that is in excess of earned income will be reduced, and any excess premium will be refunded to the insured.

An insurer can cancel a health insurance policy by delivering written notice to the insured at least how many days before the effective date of cancellation? A) 30 days B) 90 days C) 5 days D) 10 days

5 days Explanation The insurer can cancel an accident and health insurance policy at any time by delivering written notice to the insured at least 5 days before the effective date of cancellation. If a policy is canceled, the insurer must promptly return the unearned portion of any premium paid. Cancellation must be without prejudice to any claim originating before the effective date of coverage.

Bob is severely injured after falling off of his roof while cleaning the gutters. If he is unable to provide proof of loss within 90 days, it may A) be filed up to one year after the date of loss. B) reduce any claims Bob files with the insurer. C) be filed within 18 months after the date of loss. D) invalidate his claim.

be filed up to one year after the date of loss. Explanation An insured must file proof of loss within 90 days of the loss unless it is not reasonably possible. In that case, the insured may be filed within one year after the date of loss. The claim will not be invalidated or be reduced.

Which renewability provision allows an insurer to not renew a health insurance policy on a given date as specified in the policy? A) Conditionally renewable B) Cancelable C) Optionally renewable D) Guaranteed renewable

Optionally renewable Explanation The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy on the date specified in the contract. The date specified is typically the policy anniversary date or the premium due date.

Which of the following provisions must be included in an individual accident and health insurance policy? A) 2-year time limit on certain defenses B) Coverage of newborns C) Misstatement of age D) Change of occupation

2-year time limit on certain defenses Explanation One of the 12 mandatory provisions that each individual accident and health insurance policy must include is a 2-year limit on certain defenses of the insurer. Misstatement of age and change in occupation are 2 of the 11 optional provisions that may be included. Provisions regarding newborn coverage can vary by state and may be required, but this is not 1 of the 12 mandatory provisions adopted under the Uniform Individual Accident and Sickness Policy Provisions Law.

A required provision of individual health insurance policies is that a written notice of claim must be given to the insurer within A) 14 days after the loss occurs or commences B) 30 days following an accident or illness C) 45 days after an accident or the beginning of an illness D) 20 days after the loss occurs or commences, or as soon as is reasonably possible

20 days after the loss occurs or commences, or as soon as is reasonably possible Explanation Individual health insurance policies must provide that a written notice of claim must be given to the insurer within 20 days after a covered loss occurs or as soon as is reasonably possible.

Beth's health insurance policy contains a provision that allows her to renew coverage up to age 65. However, the policy also states that should Beth lose her job, the insurance company will cancel the policy, regardless of Beth's age. In terms of renewability, what type of policy does Beth have? A) Guaranteed renewable B) Cancelable C) Optionally renewable D) Conditionally renewable

Conditionally renewable Explanation A conditionally renewable policy allows an insurer to terminate the coverage, but only in the event of one or more conditions stated in the contract. These conditions cannot apply to the insured's health. Most frequently, they are related to the insured reaching a certain age or losing gainful employment.

Hubert, the insured, changes to a more hazardous job than the one he had when he applied for his disability income policy. According to the policy's change of occupation provision, what will happen when the insurer learns of his job change? A) The insurer will cancel the policy unless Hubert pays an additional premium to cover the higher risk. B) There is nothing the insurer can do as long as Hubert pays the premiums for the policy. C) Policy benefits will be reduced to the amount the premiums would have purchased if they were based on the more hazardous occupation. D) A specified percentage of benefits penalty will be charged against any future benefit payments.

Policy benefits will be reduced to the amount the premiums would have purchased if they were based on the more hazardous occupation. Explanation According to the policy's change of occupation provision, policy benefits will be reduced to an amount the premiums would have purchased if they were based on the more hazardous occupation. Had Hubert changed to a less hazardous occupation (i.e., one that calls for a lower premium), the insurer would pay the full benefit for the loss and refund the excess premium to him.

If total disability (loss-of-time) benefits from all disability income coverage for the same loss exceed the insured's monthly earnings at the time of disability, what is the insurer's liability to the insured? A) The insurer can cancel the policy, claiming overinsurance. B) The insurer can reduce the benefits payable by half. C) The insurer must pay the total benefits as specified in the policy. D) The insurer must pay the proportionate amount of benefits that the insured's earnings bear to the total benefits.

The insurer must pay the proportionate amount of benefits that the insured's earnings bear to the total benefits. Explanation If total disability (loss-of-time) benefits from all disability income coverage for the same loss exceed the insured's monthly earnings at the time of disability, the insurer is liable for that proportionate amount of benefits as the insured's earnings bear to the total benefits. Total indemnities must be the lesser of $200 or total benefits under applicable coverage.

Jane submits written notice of a health insurance claim to her insurance company. After a month has passed, the insurer still has not provided her with a claim form. Which of the following statements is CORRECT? A) Jane should assume her claim has been denied. B) The insurer may not deny the claim, since it did not timely supply a claim form. C) The insurer should have furnished Jane with a claim form no later than 15 days after receiving the notice of claim. D) Jane must resubmit her notice of claim because more than 30 days have passed.

The insurer should have furnished Jane with a claim form no later than 15 days after receiving the notice of claim. Explanation All individual accident and health insurance policies must contain a claim forms provision. According to this section, the insurer must provide a claim form to Jane within 15 days of receiving her written notice of claim.

All of the following specify owners' rights in a health insurance policy EXCEPT A) a reinstatement provision B) a grace period provision C) an incontestable provision D) an unpaid premium provision

an unpaid premium provision Explanation The unpaid premium provision of a health insurance policy does not pertain to owners' rights. It is designed to protect the rights of the insurer. The required provisions protect the insured, while the optional provisions, such as the unpaid premium provision, protect the insurer.

The entire contract provision of a disability income policy defines the contract to include all the following EXCEPT A) the riders attached to the policy when it was issued B) the properly completed and signed application C) any riders the insurer may unilaterally add to the policy in the future D) the policy document

any riders the insurer may unilaterally add to the policy in the future Explanation The entire contract provision states that the contract includes the policy document, any riders attached to the policy when it was issued, and the signed application. Any riders that are unilaterally added in the future do not fall within the entire contract provision in a policy.

All of the following are optional provisions in an individual accident and health insurance policy EXCEPT A) loss-of-time benefit adjustment B) change of beneficiary C) change of occupation D) illegal occupation

change of beneficiary Explanation Change of occupation, loss-of-time benefit adjustment, and illegal occupation provisions are optional provisions in an individual accident and health insurance policy. If they are included in a policy, the Commissioner must approve the wording of the descriptions. A change of beneficiary provision is a mandatory provision. It provides that the insured has the right to change the beneficiary, unless an irrevocable beneficiary designation has been made.

Smith and Jones Insurance has totally revised its individual health insurance policy. Tamika likes the coverage she already has and is concerned about the changes. She contacts the producer who sold her the policy, who tells her that A) she has 6 months to accept the new policy B) rising health care costs have necessitated the changes, and her policy is still the best coverage available C) under the entire contract provision of her policy, the company has the right to make changes with 30 days' notice D) her policy will not be affected by the changes

her policy will not be affected by the changes Explanation Under the entire contract provision of her policy, no changes can be made to the policy after it has been issued. Therefore, her policy will be unaffected.

If the insurer cancels policy, unearned premium will be returned to the insured A) as a flat cancellation B) on a short rate basis C) on a pro rata basis D) via registered mail

on a pro rata basis Explanation Under the optional "Cancellation" provision, an insurer must give the insured 5 days' written notice of cancellation and return unearned premium on a pro rata basis.

With an optionally renewable policy, the insurance company reserves the right to A) cancel the policy at any time with 5 days' notice B) terminate coverage at any policy anniversary date or premium due date C) modify the coverage if claims filed by the insured exceed an amount specified in the policy D) increase the premium on a policy if benefits paid to an insured exceed a stated amount

terminate coverage at any policy anniversary date or premium due date Explanation With an optionally renewable policy, the company reserves the right to terminate coverage at any policy anniversary date or premium due date, but it may not exercise this right between these dates.

Applicants for which of the following types of policies would normally require the most comprehensive underwriting? A) Guaranteed renewable disability income insurance B) Basic medical expense insurance C) Limited accident insurance D) Industrial health insurance

Guaranteed renewable disability income insurance Explanation Applicants for noncancelable and guaranteed renewable disability income insurance would require the most comprehensive underwriting because these policies allow an insured's guaranteed renewal of the policy up to a certain age, without evidence of insurability.

Which of the following is NOT an optional provision? A) Other insurance with this insurer B) Insuring clause C) Insurance with other insurers D) Relation of earnings to insurance

Insuring clause Explanation The insuring clause states the types of losses which are covered by the policy and the insurers promise to pay the insured in the event of a covered loss. This provision is neither mandatory or optional. Other insurance with insurer, insurance with other insurers and relation of earnings to insurance are all optional provisions.

With what provision of a standard health insurance policy would the following clause be associated: "the insured and the insurer shall have the same rights thereunder as they had under the policy immediately before the due date of the defaulted premium"? A) Time limit on certain defenses provision B) Grace period provision C) Reinstatement provision D) Cancellation provision

Reinstatement provision Explanation The reinstatement provision provides that when a policy lapses due to nonpayment of premiums, but the insured subsequently pays the renewal premium (which the insurer accepts without requiring an application for a new policy), the policy will be reinstated with the same provisions and rights as before (with the exception of coverage for sickness-related losses within the first 10 days after reinstatement).

All of the following provisions are optional in individual health insurance policies EXCEPT A) a misstatement of age provision B) a change of occupation provision C) an intoxicants and controlled substances provision D) an incontestability provision

an incontestability provision Explanation An incontestability provision is a mandatory, rather than optional, provision in individual health insurance policies. An incontestability provision states that 2 years after the date of issue, no misstatements on the application (unless fraudulent) may be used to void the policy or deny a claim.

Under the required claim forms provision of a health insurance policy, an insurer must furnish the claim form to the insured within how many days after receiving a notice of claim? A) 10 days B) 15 days C) 21 days D) 30 days

15 days Explanation Under the required claim forms provision of a health insurance policy, an insurer must furnish its claim form to the insured within 15 days after receiving a notice of claim. Otherwise, the claimant may submit the proof of loss in any form that explains the occurrence, character, and extent of the loss.

A broad statement that generally appears on the first page of a health insurance policy and specifies conditions under which benefits will be paid is known as A) the assurance clause B) the insuring clause C) the guaranty provision D) the warranty provision

the insuring clause Explanation The insuring clause identifies the insurer and insured, specifies benefits, and includes the insurer's promise to pay benefits for specific kinds of losses.

Jasmine is covered under her employer's health plan. She is called to active military duty. Upon her return, which of the following statements regarding her coverage is CORRECT? A) She will be conditionally covered for up to 2 years. B) She will be fully covered, without the need to provide proof of insurability. C) She must reapply for coverage in the group at the next open enrollment period. D) She will not be covered because she receives veterans benefits.

She will be fully covered, without the need to provide proof of insurability. Explanation Upon her release from military service, she can be readmitted to the group upon her return to work without the need to provide proof of insurability. However, as long as she is on active military duty, she is not covered under her group plan.

All of the following provisions are required in an individual health and accident policy EXCEPT A) a grace period provision B) an insurance with other insurers provision C) a physical examination and autopsy provision D) an entire contract provision

an insurance with other insurers provision Explanation There are 2 provisions that address insurance with other insurers that may be included in an individual health and accident policy, but these provisions are optional. The other 3 provisions listed in the answer choices are mandatory.

All of the following provisions in an individual health insurance policy are optional EXCEPT A) proof of loss B) misstatement of age C) change of occupation D) unpaid premium

proof of loss Explanation All health insurance policies must include a proof of loss provision. According to this provision, the insured must furnish a completed claim form to the insurer within 90 days of the date of loss.