Chapter 7: Health Policy Provisions, Clauses and Riders.

Uniform Optional Provisions

-Change of occupations -Misstatement of age - Over-insurance - Unpaid premium a. insurance with other insurers b. other insurance in this insurer - Conformity with state statutes - Illegal occupation - Intoxicants and narcotics (can void a claim)

Insuring Clause

-parties to the contract -length of coverage -premium to be paid -types of loss (peril) covered two parties are the insurer and the insured. The agent is not part of the party, they just sign the documents.

Free-Look Period

1st day is when you deliver a policy. The free look period is 10 days, senior insurance can be different.

If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following? A. Adjust the benefit in accordance with the increased risk B. Cancel the policy C. Increase the premium D. Exclude coverage for on-the-job injury

A. Adjust the benefit in accordance with the increased risk A part of the premium rating concerns the hazard of occupation.

What type of policy allows the insurance company to cancel a policy at any time? A. Cancellable B. Renewable C. Guaranteed renewable D. Noncancellable

A. Cancellable A cancellable policy may be canceled at any time with proper written notice from the insurer and a refund of any unearned premium. (The insurer must continue to honor any claims submitted before the cancellation date.)

A Health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective? A. Immediately B. After 14 days C. After 21 days D. After 31 days

A. Immediately Coverage for accidents is immediate when reinstatement occurs, but coverage for sickness may have a waiting period of about 10 days.

Which of the following does the Insuring Clause NOT specify? A. The name of the insured B. A list of available doctors C. Covered perils D. The insurance company

B. A list of available doctors The Insuring Clause lists the insured, the insurance company, what kind of losses are covered, and for how much the losses would be compensated.

The provision that states that both the printed contract and a copy of the application form the contract between the policyowner and the insurer is called the A. Master policy. B. Entire contract. C. Certificate of insurance. D. Aleatory contract.

B. Entire contract. The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the attached application in a test of the contract's validity. This is a mandatory provision in life insurance.

Insured Z's health insurance policy year begins in January. His policy contains a carry-over provision. In November, he has a small claim which is less than his deductible. Which of the following is true? A. The insured must satisfy this year's deductible, but next year's deductible will begin when or if he makes a claim in the following calendar year. B. The insured may carry over the amount of this year's expenses to next year, which will help satisfy next year's deductible. C. The deductible will be waived. D. The insured is now eligible for an integrated deductible until the new policy year.

B. The insured may carry over the amount of this year's expenses to next year, which will help satisfy next year's deductible. Under the carry over provision, if the insured did not incur sufficient medical costs during the year to meet the deductible, any medical expenses incurred during the last three months may be carried forward to the next year, offsetting the total deductible costs for that year.

Which of the following statements is true regarding coinsurance? A. The smaller the percentage that is paid by the insured, the more consistent the required premium will be. B. The larger the percentage that is paid by the insured, the lower the required premium will be. C. The larger the percentage that is paid by the insured, the higher the required premium will be. D. The smaller the percentage that is paid by the insured, the lower the required premium will be.

B. The larger the percentage that is paid by the insured, the lower the required premium will be. After the insured satisfies the policy deductible, the insurance company will usually pay the majority of the expenses--typically 80%--with the insured paying the remaining 20%. Other coinsurance arrangements exist, such as 90%/10%; 75%/25%; or 50%/50%. When the insured retains a larger share of the risk, they will pay a lower premium.

Which of the following terms describes the specified dollar amount beyond which the insured no longer participates in the sharing of expenses? A. First-dollar coverage B. Corridor deductible C. Stop-loss limit D. Out-of-pocket limit

C. Stop-loss limit A "stop-loss limit" is a specified dollar amount beyond which the insured no longer participates in the sharing of expenses.

An insured purchased a noncancellable health insurance policy 1 year ago. Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy? A. The insured reaches the maximum age limit specified in the policy. B. Within two years of the application, the insurer discovers a misrepresentation. C. The insured is in an accident and incurs a large claim. D. The insured does not pay the premium.

C. The insured is in an accident and incurs a large claim. The company may not cancel coverage due to covered claims. All the rest are allowable reasons for an insurer to terminate the contract.

The premium charged for exercising the Guaranteed Insurability Rider is based upon the insured's A. Assumed age. B. Average age. C. Issue age. D. Attained age.

D. Attained age. The premium charged for the increase will be based upon the attained age of the insured.

What is the main difference between coinsurance and copayments? A. With copayments, the insured pays all of the cost. B. With coinsurance, the insurer pays all of the cost. C. Coinsurance is a set dollar amount. D. Copayment is a set dollar amount.

D. Copayment is a set dollar amount. With both, copayment and coinsurance provisions, the insured shares part of the cost for services with the insurer. Unlike coinsurance, a copayment has a set dollar amount that the insured will pay each time certain medical services are used.

Which of the following riders would NOT increase the premium for a policyowner? A. Payor benefit rider B. Waiver of premium rider C. Multiple indemnity rider D. Impairment rider

D. Impairment rider The impairment rider excludes a specified condition from coverage, therefore, reducing benefits. An insurance company will not charge extra for a rider that reduces benefits.

The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the A. Incontestability clause. B. Consideration clause. C. Probationary period. D. Insuring clause.

D. Insuring clause. The insuring clause is a provision on the first page of the policy that states the coverage and when it applies.

Which of the following is NOT a feature of a guaranteed renewable provision? A. The insured has a unilateral right to renew the policy for the life of the contract. B. Coverage is not renewable beyond the insured's age 65. C. The insured's benefits cannot be reduced. D. The insurer can increase the policy premium on an individual basis.

D. The insurer can increase the policy premium on an individual basis. Guaranteed renewable provision has all the same features that the noncancellable provision does, with the exception that the insurer can increase the policy premium on the policy anniversary date. However, the premiums can only be increased on a class basis, not on an individual policy.

Provisions Affecting Income Benefits

Guaranteed Insurablity rider - allows the insured to purchase additional amounts of disability income coverage without evidence of insurability. - also referred to as a Future Increase Options or Guaranteed Purchase Options. - give to ability to get insurance if not insurable. Raises premium Relation of earnings to insurance - Allows the insurance company to limit the insured's benefits to insured'd earnings at the time of disability or average income over the last 2 years (whichever is greater) -ONLY USED ON HEALTH POLICY Cost of Living Adjustment (COLA) - protects insured against inflation - monthly benefit automatically increased - usually on the consumer price index (raises benefit 2% when needed)

Claims Procedure

Notice of claim -20 days from the date of loss to file claim Claim Form - insurer must promptly send you this Proof of loss - insured must submit this in 90 days from the date of loss sent in. Time payment of claims - provision that specifies the time of claim payment. Typically 60 days. Payment of claims - provision that specifies to whom the benefits are paid. Can direct the insurance company who to pay, as far as doctors.

Riders

Renewability -the best are noncancellable and guaranteed renewable, they give the most protection. (usually found on senior products) Nonrenewable gives you hardly any protection at all. Noncancellable (the best) - no cancellation - no increase - for the life of contract (usually to age 65) Guaranteed renewable -no cancellation - increases on renewal date (class basis only) - for the life of contract (usually to age 65) Nonrenewable (cancellable/term) - cancellation at anytime with notice -increases- based on policy - no renewals (insured must purchase new policy)

Consideration Clause

Something of value. Owner has 2 parts - premium part - representation of application

Required Provisions

The purpose of provisions is to define the rights and duties of insurers and policy owners. 1. entire contract 2. time limit on contract defenses 3. grace period 4. renewal 5. reinstatement 6. notice of claim 7. claim forms 8. proof of loss 9. time of payment of claims. 10. payments of claims 11. physical examinations and autopsy 12. legal action 13. change of beneficiary

Entire Contract

copy of original applications plus the policy.

Grace period

still have coverage until the end of grace period.

Time Limit on Certain Defenses

this is like the incontestability clause on the life insurance policy. - In the first 2 years, insurer can deny a claim due to material misrepresentation on the application. - Anytime after 2 years the claims cannot be denied even due to misstatement of facts or concealment. -Nonpayment of premium is not covered by this, if you miss paying your premium, your policy will lapse and not pay benefits. - Misstatement of age or age does not fall under this. There will be adjustments for this type of mistake.