Policy Provisions and Clauses

The insured or beneficiary must give the insurer or its agent notice of a claim within _____ days of a loss, or as soon as reasonably possible. - 20 - 30 - 60 - 90

20 The notice of claim provision requires written notice to be given to the insurer or its authorized agent within 20 days after the start of a loss, or as soon as is reasonably possible.

Cancelable

A cancelable policy may be canceled at any time by the insurer (with written advance notice stating the reason and with refund of unearned premiums) or by the insured

Rights of Renewability

A policy will also specify what type of policy renewal rights the insured may have.

Uniform Optional Provisions

Uniform optional provisions are provisions that may be included in a policy to protect the insurer's rights. If these provisions are included, they must comply with the substance of the wording established in the law. A change of occupation provision allows the insurer to pay a claim based on what the premium paid would have purchased at the rates and within its limits for a more hazardous occupation if the insured changes to, or does anything for pay pertaining to, the more hazardous occupation. It also provides that, upon receipt of proof of a change to a less hazardous occupation, the insurer will reduce the premium rate and return any excess pro rata unearned premiums. An illegal occupation provision allows the insurer to deny a claim if a contributing cause of the loss was the insured committing or attempting to commit a felony or being engaged in an illegal occupation. An intoxicants and narcotics provision allows the insurer to deny a claim if the loss was sustained or contracted because the insured was intoxicated or under the influence of a narcotic not administered by or on the advice of their physician.

Once F notified his insurer that he had changed occupations, the insurer was able to - increase the premium if F's change was to a more hazardous occupation. - reduce the premium and refund excess unearned premiums if F's change was to a less hazardous occupation. - deny any claims if F's change was reported after the grace period. - increase the benefit if F's change was to a less hazardous occupation.

reduce the premium and refund excess unearned premiums if F's change was to a less hazardous occupation. If the insured changes to a more hazardous occupation, indemnities are reduced. If he changes to a less hazardous occupation, the premium is reduced and excess premiums charged since the date of the change are refunded.

After receiving a notice of claim, the insurer has _____ days to furnish the insured proof of loss forms. - 10 - 15 - 21 - 30

15 The insurer has 15 days from the time of receiving a notice of claim to provide proof of loss forms. If the forms are not provided, the insured can submit any written proof of the character and extent of the loss.

An insured cannot take legal action to collect on an accident and health policy claim later than _____ year(s) after written proof of loss is required to be furnished. - one - two - three - four

three The legal actions provision requires that the insured wait 60 days after submitting proof of loss before suing, and limits the time to sue to no more than three years after the time proof of loss was required to be submitted.

Upon receipt of proof of loss, an insurer must pay a medical expense claim - within 10 days. - within 14 days. - within 30 days. - immediately.

immediately. Payment is due immediately upon receipt of proof of loss.

H's accident and health policy has an "other insurance with this insurer" provision. This clause - limits the total amount of benefits payable when H has more than one policy issued by the same insurer. - allows the insurer to deduct from benefits payable any amount H owed for unpaid premiums. - prohibits cancellation of a policy by the insurer. - requires that H have all policies with the same insurer.

limits the total amount of benefits payable when H has more than one policy issued by the same insurer. The other insurance in same insurer provision applies when the insured is covered by more than one policy issued by the same insurer. It may limit the total to be paid by the policies to either (1) a specified dollar amount (in which case any premium paid for excess insurance would be refunded), or (2) the limit of one of the policies (in which case premiums paid for the other policies would be refunded).

Guaranteed Renewable

A policy that is guaranteed renewable also gives the insured the right to renew the policy to a certain age. Unlike the noncancelable policy, it does allow the insurer to change the premium rates, as long as the change applies to the entire class of insureds and not just the individual. The premium rate change would be effective at the policy's anniversary. For Example Because D purchased an individual accident and health insurance policy that was guaranteed renewable to age 65, the insurer could not stop him from renewing the policy until age 65, regardless of changes in his health. Furthermore, while his premium rate could be changed by class, it could not be increased due to changes in his health.

An insured cannot take legal action to collect on an accident and health policy claim earlier than _____ days after submitting written proof of loss. - 20 - 30 - 60 - 90

60 The legal actions provision requires that the insured wait 60 days after submitting proof of loss before suing, and limits the time to sue to no more than 3 years after the time proof of loss was required to be submitted.

Conditionally Renewable

An insured can also renew a policy that is conditionally renewable. But this provision lets the insurer refuse renewal at the policy's anniversary date under certain conditions specified in the policy, such as class or geographical considerations, but not because of the insured's physical condition.

Optionally Renewable

An optionally renewable policy gives the insurer the option to allow renewal or not. The insurer can refuse renewal at the anniversary date or at a premium due date.

WHICH of the following is true about a notice of claim? - For notice to be effective, the beneficiary or the insured must give notice to the insurer, rather than to the agent. - The notice may be oral. - The notice must be given within 20 days after the loss occurs or as soon as reasonably possible. - The provision relating to notice of claim is an optional provision.

The notice must be given within 20 days after the loss occurs or as soon as reasonably possible. Notice of claim is a mandatory provision, which requires written notice to be given to the insurer or its authorized agent within 20 days after the start of a loss, or as soon as is reasonably possible.

When D submitted his notice of claim, his insurer did not send him a proof of loss form within 15 days. As a result, D - need not provide a proof of loss. - must request that the insurer furnish a proof of loss form immediately. - is entitled to the claim payment without having to submit any proof of loss. - can satisfy the proof of loss requirement with a letter or other written document that details the nature and extent of the loss.

can satisfy the proof of loss requirement with a letter or other written document that details the nature and extent of the loss. The insurer has 15 days from the time of receiving a notice of claim to provide proof of loss forms. If the forms are not provided, the insured can submit any written proof of the character and extent of the loss.

Because of the time limit on certain defenses provision, the insurer - can use material misstatements in the application to deny the validity of the contract for only a limited time. - can deny a claim based on material misstatements in an application at any time. - may make changes in the policy. - may require the insured to prove he is insurable.

can use material misstatements in the application to deny the validity of the contract for only a limited time. This provision provides that after a period of time no misstatements, except fraudulent misstatements in the application, can be used to void the policy or deny a claim.

D's disability policy required that he report a claim within 20 days of a loss, but D did not do so. When D called his agent to see if the agent could waive the 20-day requirement, his agent informed D that he could not waive any policy provisions because of the _____ provision. - legal actions - conformity with state statutes - time limit on certain defenses - entire contract

entire contract The entire contract provision states an agent cannot change the policy or waive its provisions. Changes in the policy are valid only if approved in writing by an executive officer of the insurer and the approval is endorsed in or attached to the policy.

When R did not pay his accident and health insurance premium by the due date, and his policy went into a grace period - his coverage was suspended until he paid the premium. - he had 31 days to pay his premium because he was making monthly premium payments.. - he had a 10-day free-look period. - he was allowed to pay the premium late without losing coverage.

he was allowed to pay the premium late without losing coverage. A grace period is the period after the premium is due during which coverage remains in effect. Different states have different grace periods.

G's disability income policy has a relation of earnings to insurance provision. This provision - limits benefits to no more than G's average income if G has more than one disability income policy covering the disability. - provides that G cannot receive more than 80% of lost income, regardless of the number of policies covering the loss. - is also included in policies that pay medical expense benefits. - provides that coverage may be canceled if G purchases policies providing more in benefits than his average earnings.

limits benefits to no more than G's average income if G has more than one disability income policy covering the disability. This provision is optional. It may be found in disability income policies -- not medical expense policies. It limits income payments under two or more policies to no more than the insured's average income, so as to prevent overinsurance (insurance paying more income than would be lost due to the disability).

The time of payment of claims provision requires an insurer to pay periodic benefits (e.g., disability income) at least - monthly. - quarterly. - semiannually. - annually.

monthly Any periodic payments must be paid at least monthly.

A producer may change an accident and health policy or waive its provisions - with the approval and signatures of the insured and of an executive officer of the insurance company. - with the approval and signature of the insured. - with the approval and signature of an executive officer of the insurance company. - never.

never The entire contract provision states an agent cannot change the policy or waive its provisions. Changes in the policy are valid only if approved in writing by an executive officer of the insurer and the approval is endorsed in or attached to the policy.

If an insured misstates his age in an accident and health insurance application, the insurer may - cancel the policy. - increase premiums if the insured was older at the time of application than claimed. - refund excess premiums paid if the insured was older at the time of application than claimed. - pay benefits based on what the premiums paid would have purchased at the correct age.

pay benefits based on what the premiums paid would have purchased at the correct age. The misstatement of age provision allows the insurer to adjust all benefits payable under the policy to the amount the premiums would have purchased at the correct age. If the insured was older than stated in the application, benefits would be reduced. If the insured was younger than stated in the application, benefits would be increased.

The entire contract provision provides that the - policy, its endorsements, the application and riders constitute the entire contract between the policyowner and insurer. - policy, its endorsements, and riders are kept on file at the home office of the insurer. - policy and all its attachments are held by the agent and may be examined by the applicant at any time. - entire contract must be filed with the state insurance department.

policy, its endorsements, the application and riders constitute the entire contract between the policyowner and insurer. The entire contract provision states that the entire contract is the policy, the application, its endorsements and riders. Therefore, oral statements and other documents (e.g., ads) would not be part of the contract.

When L failed to pay his late premium during the grace period, his coverage lapsed. When he applied for reinstatement, he did not immediately hear from the insurer. His policy will automatically be reinstated if the insurer does not reject his application within ____ days. - 20 - 30 - 45 - 60

45 To reinstate, the insured may send the unpaid premiums to the insurer or a duly authorized agent of the insurer. The insurer may require either the premiums only or the premiums and an application. If an application is required, the insurer has 45 days to reject the application. If no application is required, reinstatement is automatic once the premium is paid. The past due premium need not apply to more than 60 days prior to reinstatement.

Under an accident and health policy, written proof of loss generally must be supplied to the insurer within _____ days after the date of a loss. - 20 - 30 - 60 - 90

90 The proof of loss provision requires the insured to furnish written proof of loss within 90 days after date of the loss. This is extended to 1 year if it is not reasonably possible to provide proof within the 90 days, and extended indefinitely if the insured is legally incapacitated, e.g., in a coma.

Uniform Mandatory Provisions

A legal actions provision says the insured cannot sue within 60 days after furnishing proof of loss or later than three years after written proof of loss was required to be furnished. For Example One month after submitting proof of loss for his medical expenses, F was at his attorney's office, demanding that they sue the insurer for payment of his claim, pointing out that the time of payment of claims provisions requires immediate payment. His attorney shows him that they must wait another 30 days before they can sue, as legal action cannot be taken within 60 days after furnishing proof of loss. A misstatement of age provision provides that, if the insured's age is misstated, the insurer cannot void the policy or deny coverage but can pay a claim based on the amount of coverage the premium paid would have purchased had the correct age been given. For Example When Q purchased her disability income policy 10 years ago, she misstated her age on her application, claiming to be 40 years old when, in fact, she was 46. Now when she submits a claim, the insurer discovers the misstatement. Under the terms of the misstatement of age or sex provision, the insurer cannot void the contract because of the misstatement. Even though the insurer discovers the misstatement after the two-year incontestability period, the insurer can reduce the amounts payable under the policy. Therefore, instead of paying her $1,500 per month, they will only pay $1,100, which is the amount her premium would have purchased if the insurer had known she was 46 at the time she purchased the policy.

Uniform Mandatory Provisions

A notice of claim provision says written notice of a claim sufficient to identify the insured must be submitted by or on behalf of the insured or beneficiary to the insurer or its producer within 20 days after the occurrence or the beginning of any loss covered by the policy, or as soon as reasonably possible. If the claim is for a disability income benefit which may be payable for at least two years, the insured may be required to give notice of continuance of the disability every one to six months unless he is legally incapacitated (the "loss of earnings" test). For Example When W blew out her knee cross-country skiing, she sent written notice of the injury to her insurance producer five days later. Her producer notified the insurance company 30 days later, after returning from her trip to Europe. Although the insurance company was not actually notified within 20 days of the loss, the notification to the producer was considered the same as notification to the insurer. Therefore, the insurance company cannot claim the notice of loss was late. The claim forms provision says that if the insurer does not send proof of loss forms within 15 days after receipt of a notice of claim, the insured claimant can submit some other written proof of loss. The proof of loss provision gives the insured time to file proof of loss: Within 90 days from the date of loss, or for a continuing loss, before the 91st day from the date of loss; or One year, if his physical condition makes it not reasonably possible to furnish proof in time, and he furnishes proof as soon as it is reasonably possible; or Without any time limit if he is legally incapacitated

Nonduplication of Benefits

A number of provisions may be included in the policy to prevent the insured from receiving duplicate benefit payments. A relation of earnings to insurance clause may be placed in a disability income policy that is guaranteed renewable until at least age 50, or for at least five years. It limits income payments to an amount that would be reasonable in relation to the income lost due to the disability. It states that the insurer may limit its payment to a pro rata amount based on its percentage of the total coverage, if the monthly disability income benefits payable from all the insured's policies total more than: he was earning when the disability started; or his average monthly earnings for the past two years. The insurer must return the portion of the premiums paid during those two years for any excess coverage. The other insurance in this insurer provision provides that the insurer can either limit the: total coverage under all policies issued by the same insurer to a specified dollar amount; or insurance effective under all policies from the same insurer to one policy chosen by the insured, his beneficiary or estate.

Uniform Mandatory Provisions

A physical examinations and autopsy provision lets the insurer, at its own expense, examine the insured as often as reasonably required while a claim is pending. If it is legal in the state, the insurer may make an autopsy in case of the insured's death. A time of payment of claims provision states periodic payments (for example, disability insurance claims) will be paid at specified intervals (at least monthly); other claims will be paid immediately upon receipt of written proof of loss. The payment of claims provision states benefits will be paid to the insured, and death benefits will be paid to the beneficiary, or if there is no beneficiary, to the insured's estate. The insurer may include in this provision, a facility of payments clause. This provides that if benefits are payable to the insured's estate, or to an insured or beneficiary who is a minor or otherwise not competent to give a valid release, the insurer may pay up to a certain amount of the claim to any relative of the insured or beneficiary entitled to the payment. The insurer may also include an assignment of payments clause. This allows the insurer to pay service providers directly unless the insured requests otherwise in writing not later than the time of filing proof of loss. The insurer cannot require that a particular provider render any service.

Period of Time for Renewal (Term Policy)

A policy may be written for a specified term or period of time. This might be called a "term policy." It gives the insured no right to renew upon expiration. Travel accident and blanket insurance policies are examples of period of time health insurance contracts. For Example S has a policy that allows him to renew as long as he is employed at the time of renewal. This policy is a conditionally renewable policy. *** When T's policy comes up for renewal, the insurer decides to not renew it. This policy is optionally renewable. *** C buys a travel accident policy at the airport. The coverage is for one flight and expires at the end of the flight. This is a term policy, or period-of-time policy.

Noncancelable

A policy that is noncancelable will have the highest premium. This is because it provides the greatest benefit to the insured. When a policy is noncancelable, the insured can renew the policy to a certain age without proof of insurability, and the insurer has no right to change any policy provisions or the premium rate unilaterally. This right may be found in disability income policies. A noncancelable policy may also be called a noncancelable and guaranteed renewable policy. For Example Because F's disability income policy is noncancelable to age 65, his insurance company cannot cancel or void the policy or increase premiums before F reaches age 65, unless F stops paying premiums or the insurance company discovers within two years that F made a material misrepresentation or, at any time, that F made a fraudulent misstatement on his insurance application.

Uniform Mandatory Provisions

A reinstatement provision lets the insured reinstate a policy lapsed due to unpaid premiums either: automatically, if the insurer or producer accepts the premium without an application, or upon approval of an application or 45 days after the date of a conditional receipt, if the application has not been disapproved. The reinstated policy will cover a loss from accidental injury immediately and a loss due to sickness starting 10 days (probationary period) after the reinstatement date. For Example Three days after reinstating a medical expense policy, Q broke his leg. Five days later he came down with pneumonia. Because of the reinstatement provision, his policy would cover the broken leg (since coverage for injury is effective immediately after reinstatement), but would not cover any of the expense relating to the illness (since illness is covered only if it starts later than 10 days after reinstatement).

Uniform Mandatory Provisions

A time limit on certain defenses provision states that only fraudulent misstatements in the application could be used to void the policy or to deny a claim starting after two years from the date the policy was effective. However, this two-year limit does not apply to misstatement of age, occupation, or other insurance. A policy that is guaranteed renewable to at least age 50 or, if issued after age 44, guaranteed renewable for at least five years, may instead have an incontestable provision that states that after the policy has been in force for two years during the insured's lifetime (excluding any period during which the insured is disabled), it is incontestable as to statements in the application. With either provision, no claim for a loss starting after the two years can be reduced or denied on the ground that a disease or physical condition not specifically excluded from coverage had existed prior to the effective date of coverage. For Example G unintentionally forgot to disclose a pre-existing heart condition on his accident and health insurance application. When he suffered a heart attack six months later, the insurance company denied coverage. If he had waited over two years before having the heart attack, he would have been covered. A grace period provision allows the policy to stay in force after a premium is due for a specific period of time after the premium due date. Claims incurred during the grace period are covered, but the insurer is allowed to deduct the past-due premium from the claim payment. For Example J pays her medical insurance premiums semi-annually on January 1 and July 1 each year. Because of holiday extravagance, she did not mail her January premium to the insurer and, in fact, decided not to pay any more premiums at all. As luck would have it, she broke her arm on January 5. She would still be covered because the injury occurred within her grace period, and whether or not she pays any additional premiums, she is covered for the grace period. The premium that had been due may be deducted from the amount of the claim paid, depending on the insurer's practices.

review

An individual policy must have certain uniform provisions. Uniform provisions are provisions that have captions and wording exactly as found in the state statutes or that have been approved for use by the Insurance Commissioner because they are worded at least as favorably as the statutory wording to the insured or beneficiary. The entire contract; changes provision makes the policy, endorsements and attached papers the entire insurance contract. It makes it clear that a producer has no authority to change the policy or waive policy provisions. A time limit on certain defenses provision states that only fraudulent misstatements in the application could be used to void the policy or to deny a claim starting after two years from the date the policy was effective. A grace period provision allows the policy to stay in force after a premium is due for a specific period of time after the premium due date. Claims incurred during the grace period are covered, but the insurer is allowed to deduct the past-due premium from the claim payment. The number of days of the grace period in Idaho may not be less than seven days for a weekly premium policy, ten days for a monthly premium policy or 31-days for any other policy. A reinstatement provision lets the insured reinstate a policy lapsed due to unpaid premiums either automatically, if the insurer or producer accepts the premium without an application, or upon approval of an application or 45 days after the date of a conditional receipt, if the application has not been disapproved. A notice of claim provision says written notice of a claim sufficient to identify the insured must be submitted by or on behalf of the insured or beneficiary to the insurer or its producer before the 21st day after the occurrence or the beginning of any loss covered by the policy, or as soon as reasonably possible.

Other Provisions and Clauses

An insuring clause (or insuring agreement) in the policy specifies the types of expenses covered as the result of an injury and/or illness and cites the benefits provided by the contract. A free-look provision ("Notification That Policy is Returnable"/ "Right to Return") must be on the face of each individual renewable policy. The free-look period begins when the applicant receives the policy (upon delivery), not when the policy is issued. The insured may return the policy within a state-mandated period of time after receipt of the policy and receive a full premium refund. Senior-citizen policies, like long-term care, Medicare Supplement and Medicare Advantage policies will have a longer free-look period than other contracts. If the policy is returned, there is no coverage in effect prior to the return. A consideration clause provides that the consideration is the applicant's initial premium and statements in the application. The insurer's consideration is the promise to pay the benefits shown in the insuring agreement if the loss if covered by the policy. An ownership provision states the policy rights that belong to the policyowner. These rights include the right to pay premiums, assign benefits to providers, change beneficiaries, reinstate the policy, etc. Exercise of some of these rights would be subject to beneficiary approval if there were an irrevocable beneficiary.

Uniform Mandatory Provisions

Note The following information is specific to law and rule in each individual state. Please refer to your state's law and rules sections of this course for specific details regarding these provisions of law An individual policy must have certain uniform provisions. Uniform provisions are provisions that have captions and wording exactly as found in the state statutes or that have been approved for use by the Insurance Commissioner because they are worded at least as favorably as the statutory wording to the insured or beneficiary. The entire contract; changes provision makes the policy, application, endorsements and attached papers the entire insurance contract. It requires that policy changes have the approval of an executive officer of the insurer endorsed on or attached to the policy. It makes it clear that a producer has no authority to change the policy or waive policy provisions. A change of beneficiary provision lets the policyowner surrender or assign the policy, change the beneficiary, and make any other policy changes without the beneficiary's consent, unless the beneficiary is irrevocable.

If asked by an insured if he could make any changes in the policy, agent R should respond that - R could waive policy provisions. - R may make changes in the policy with the insured's consent. - any policy changes must be approved by an executive officer of the insurer and endorsed on or attached to the policy. - policy changes may be approved by telephone communication with the insurer.

any policy changes must be approved by an executive officer of the insurer and endorsed on or attached to the policy. any policy changes must be approved by an executive officer of the insurer and endorsed on or attached to the policy.