Chapter 12 - Individual Policy Provisions

Louise purchased a disability policy when her salary was $4,000 a month. Later, she lost that job and her salary was reduced to $2,000 a month. Three years ago, she became self-employed and now receives $3,500 a month. The maximum disability benefit she might expect will be based on which salary amount? A. $2,000 B. $4,000 C. The weighted average of her income levels over the life of the contract D. $3,500

$3,500 *Relations of Earnings to Insurance (an Optional Uniform Provision) establishes that disability benefits may not exceed the monthly earnings of an insured at the time the disability commenced, or his/her average earnings for the 2 years immediately preceding the disability, whichever is greater.

One of your clients just reinstated his health insurance plan. When is coverage effective for sickness and accident? A. 30 days for sickness, immediate coverage for accidents B. 10 days for accident and 48 hours for sickness C. Immediately for both accident and sickness D. 10 days for sickness, and immediately for accidental injuries

10 days for sickness, and immediately for accidental injuries

An insured should receive necessary claim forms within _____ days after notice of claim. A. 10 B. 5 C. 20 D. 15

15 days *According to the Claim Forms Provision (a Mandatory Uniform Provision), the insured should receive the necessary claim forms within 15 days after notice of claim.

An insured should receive necessary claim forms within _____ days after notice of claim. A. 5 B. 10 C. 20 D. 15

15 days = Claim forms

The Legal Actions provision preserves the insured's right to bring suit against their own insurer, but the insured must wait at least _____ days after filing a proof of loss before pursuing this action. A. 45 B. 30 C. 60 D. 90

60 days

Which of the following is the correct number of days in the grace period for each premium mode? A. 10 days for weekly, 15 for all others B. 7 days for weekly, 10 days for monthly, 31 for all others C. 10 days for weekly, 15 days for monthly, 31 for all others D. 7 days for weekly, 10 days for monthly, 28 for all others

7 days for weekly, 10 days for monthly, 31 for all others *According to the Grace Period Provision (a Mandatory Uniform Provision), this is the correct response.

Proof of loss is required within _____ days of loss. A. 90 B. 180 C. 45 D. 60

90 days for Proof of Loss *The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must generally provide proof of the loss within 90 days of the loss, or within the shortest time possible, but not exceeding 1 year unless the insured suffers legal incapacity.

Based upon Optional Uniform Provisions, in which of the following circumstances would an insurer have the right to deny disability income benefits entirely and disregard a claim as void? A. At the time of disability, the insured's earnings are less than the policy benefits B. A broken leg sustained while committing a robbery C. A claim incurred while working in a more hazardous occupation than listed on the application D. Misstatement of age (by 2 years) on the application

A broken leg sustained while committing a robbery *The Change of Occupation, Misstatement of Age, and Relation of Earnings to Insurance are all optional provisions that could allow an insurer to reduce benefits. The Illegal Occupations and Actions provision could allow an insurer to deny benefits entirely.

Kirk has just reinstated an individual A&H policy that had lapsed and wants to know how soon coverage will be in effect for any accident or sickness. You, the agent, would say: A. Sickness immediately, accidents after 30 days B. Accidents immediately, sickness after 30 days C. Sickness immediately, accidents after 10 days D. Accidents immediately, sickness after 10 days

Accidents immediately, sickness after 10 days *Upon reinstatement, accidents are covered immediately, and sickness after 10 days. This prevents insureds from reinstating a policy when they are already sick.

All states have adopted the Uniform Individual Accident and Sickness Policy Provision Law. If an insurer changes any of these provisions, they must make sure it does not: A. Weaken the application wording B. Conform to NAIC requirements C. Alter the minimum requirements of any provision D. Cancel the law of large numbers

Alter the minimum requirements of any provision *The insurer must assure that any variation must be at least as favorable as the original wording, and no mandatory provision may be deleted if applicable to the coverage.

Which of the following allows reimbursement benefits to be paid directly to medical providers? A. Assignment of benefits B. Precertification C. Schedule of benefits D. Change of insured

Assignment of benefits *When a policy pays on a reimbursement basis, benefits are paid directly to the insured. The exception to this is if the insured assigned benefits to the provider(s), in which case they would then be paid directly to the provider.

Which of the following allows reimbursement benefits to be paid directly to medical providers? A. Schedule of benefits B. Change of insured C. Precertification D. Assignment of benefits

Assignment of benefits *When a policy pays on a reimbursement basis, benefits are paid directly to the insured. The exception to this is if the insured assigned benefits to the provider(s), in which case they would then be paid directly to the provider.

Which of the following is a Managed Care Provision used by insurers to monitor hospital stays? A. Prospective Review B. Concurrent Review C. Precertification D. Retrospective Review

Concurrent Review *Once an insured is admitted to the hospital, the insurer monitors the insured's hospital stay to make certain that everything is proceeding on schedule through the Concurrent Review Provision.

Which of the following is not a Mandatory Uniform Provision? A. Payment of Claims B. Physical Exam and Autopsy C. Reinstatement D. Conformity with State Statutes

Conformity with State Statutes *Conformity with State Statutes is an Optional Uniform Provision.

Which of the following is not a Mandatory Uniform Provision? A. Physical Exam and Autopsy B. Reinstatement C. Conformity with State Statutes D. Payment of Claims

Conformity with State Statutes =Optional

When an individual is covered by more than one health plan and is injured, what provision determines which plan is that person's primary coverage? A. Extension of Benefits B. Continuation of Coverage C. Conversion Privilege D. Coordination of Benefits

Coordination of Benefits *The Coordination of Benefits provision determines that a person's own employer-sponsored health plan is his/her primary coverage. However, if any plan fails to include a coordination of benefits provision, that plan would automatically be primary.

All states have adopted the Uniform Individual Accident and Sickness Policy Provision Law. If an insurer changes any of these provisions, it must make sure that the change does not: A. Violate legal precedent B. Nullify the law of large numbers C. Weaken its grounds to void the policy D. Create a meaning that is less favorable to the insured than the original wording

Create a meaning that is less favorable to the insured than the original wording *The insurer must assure that any variation must be at least as favorable as the original wording and no provision may be deleted.

Beth has a contract stating she must be disabled for 3 months before benefits will begin to be paid. This 3-month period is known as the: A. Probationary Period B. Elimination Period C. Grace Period D. Contingency Period

Elimination Period *The Elimination Period is a period of time that must elapse after onset of a disability before benefits begin to be paid.

The Minimum Benefit Standards under a qualified LTC policy include all of the following, except: A. An Outline of Coverage must be delivered to an applicant on the initial solicitation and prior to the presentation of the application form B. Every LTC policy must include basic policy requirements in the policy provisions C. Every LTC policy must offer optional inflation protection to offset the increased costs of care D. Every LTC policy must be issued as noncancellable

Every LTC policy must be issued as noncancellable *LTC policies must contain a renewal provision that is no less favorable to the insured than guaranteed renewable, not noncancellable. All other possible answers are Minimum Benefit Standards to be met under LTC policies.

All of the following are examples of cost containment and managed health care, except: A. Pre-authorization B. Mandatory second surgical opinion C. Experimental drug treatment D. Concurrent review

Experimental drug treatment

Right to Examine is the same as: A. Free Look Period B. Waiting Period C. Probationary Period D. Elimination Period

Free Look Period *Right to Examine, the Free Look Period, and the Owner's (or Insured's) Right of Rescission are all terms that means the same thing. A policy returned during the Free Look period is void, no claims are payable, and all premiums paid are refunded.

Mandatory uniform provisions found in health insurance policies are designed to protect the: A. Insured B. Insurer C. Agency D. Producer

Insured

Which clause in a contract would state that Jim is covered by XYZ insurer for a monthly benefit of $2,000 in the event of disability? A. Entire Contract B. Insuring Clause C. Free Look Provision D. Consideration Clause

Insuring Clause *The Insuring Clause states who is covered, by whom, for how much, for what period, and against what peril.

Which clause in a contract would state that Jim is covered by XYZ insurer for a monthly benefit of $2,000 in the event of disability? A. Insuring Clause B. Consideration Clause C. Entire Contract D. Free Look Provision

Insuring Clause *The Insuring Clause states who is covered, by whom, for how much, for what period, and against what peril.

What is an impairment rider? A. It excludes specific conditions that normally would cause the entire policy to be declined B. It pays out an additional benefit in cases where the cause of loss is a result of an accident C. It pays out an additional benefit if the insured cannot perform 2 of the 5 specified functional activities D. It guarantees the insured's future insurability

It excludes specific conditions that normally would cause the entire policy to be declined *An impairment rider is a rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether.

Which of these is a Mandatory Uniform Provision? A. Conformity with State Statutes B. Illegal Occupation C. Misstatement of Age D. Legal Actions

Legal Actions *The only choice which is a Mandatory Uniform Provision is Legal Actions. All other responses are Optional Uniform Provisions.

What do ADLs trigger? A. Medicare Insurance B. Medicare Supplement Insurance C. Medicaid Insurance D. Long-Term Care Insurance

Long-Term Care Insurance

Precertification, Mandatory Second Surgical Opinion, and Concurrent Review are provisions in health insurance policies known as: A. Extra-Legal Actions Provisions B. Managed Care Provisions C. Oversight Provisions D. Miscellaneous Provisions

Managed Care Provisions

Which statement is false? A. Changes in an Accident and Health contract may be completed only with the written consent of the insurer B. Mandatory Second Surgical Opinion is when the physician submits claim information prior to treatment, to determine in advance if the procedure is covered C. The Guaranteed Insurability Rider may also be referred to as the Future Insurability Option D. Fraudulent misstatements made in the application can be used to deny a claim at any time

Mandatory Second Surgical Opinion is when the physician submits claim information prior to treatment, to determine in advance if the procedure is covered *This describes Precertification, not Mandatory Second Surgical Opinion.

Which provision is an Optional Uniform Provision? A. Physical Examination B. Claim Forms C. Payment of Claims D. Misstatement of Age

Misstatement of Age

If Mr. Stanley is injured while attempting to escape from the police after committing a bank robbery, his A & H coverage will probably pay: A. Full claim, less the deductible B. Amount scheduled C. One half of normal benefit D. Nothing

Nothing *Since Mr. Stanley is injured while committing an illegal act, the Illegal Occupation/Act Provision (an Optional Uniform Provision) provides the insurer's right to deny liability.

An insurer has the right to request a physical exam or an autopsy to determine its liability to pay benefits. This request may be made under which provision? A. Intoxicants and Narcotics B. Physical Exam & Autopsy C. Proof of Loss D. Proof of Disability or Death

Physical Exam & Autopsy *According to the Physical Exam and Autopsy Provision (a Mandatory Uniform Provision), the insurer, at its own expense, has the right to request a physical exam or autopsy where not prohibited by law.

The Insuring Clause under an individual A&H policy would contain all the following, except: A. The name of the insured and insurer B. Premium or rate calculations C. The length of the policy period D. What perils are covered

Premium or rate calculations *Premiums or rates would be part of the Consideration Clause. All of the other answers would be part of the Insuring Clause.

Case managers do all of the following, except: A. Providing the necessary care B. Managing the utilization review of a hospital stay C. Determining the appropriate course of action for the insured D. Requiring a referral or second opinion prior to approving a procedure

Providing the necessary care

For which of these policies is the individual allowed to deduct the premiums they pay that exceeds 7.5% of their adjusted gross income? A. Either a long-term care policy or a group health plan B. Qualified Long-Term Care C. Dental D. Workers' Compensation

Qualified Long-Term Care *The premiums paid for individual qualified LTC policies that exceed 7.5% of adjusted gross income may be tax deductible

For which of these policies is the individual allowed to deduct the premiums they pay that exceeds 7.5% of their adjusted gross income? A. Qualified Long-Term Care B. Workers' Compensation C. Either a long-term care policy or a group health plan D. Dental

Qualified Long-Term Care *The premiums paid for individual qualified LTC policies that exceed 7.5% of adjusted gross income may be tax deductible

Which provision is an Optional Uniform Provision? A. Relation of Earnings to Insurance B. Physical Examination C. Payment of Claims D. Claim Forms

Relation of Earnings to Insurance = Optional

Guaranteed Renewable means: A. Renewable with adjustable premiums determined by frequency of claim B. Renewable only at the option of the insurer C. Renewable with adjustable premiums, by classification only D. Renewable with guaranteed premium

Renewable with adjustable premiums, by classification only *The Guaranteed Renewable Provision does allow the insurer to adjust premiums upon renewal, but by class only, not on an individual basis. A class of insureds is based on age or other uniform, nondiscriminatory method.

The Guaranteed Renewable Provision states that the policy is: A. Renewable with adjustable premiums determined by frequency of claims B. Renewable with premiums that may be increased for entire classes of insureds C. Renewable only at the option of the insurer D. Renewable with no increase in premium

Renewable with premiums that may be increased for entire classes of insureds *The Guaranteed Renewable Provision allows the insurer to adjust premiums upon renewal, but by classification only, not for particular individuals.

All of the following are modes of premium payment for health insurance, except: A. Single pay B. Monthly C. Quarterly D. Annually

Single pay

Under the Entire Contract provision, all of the following may be part of the agreement between the insured and the insurer, except: A. Statements made to the applicant by the producer during the application process B. Any riders or endorsements C. The policy D. A copy of the application

Statements made to the applicant by the producer during the application process

Under the Entire Contract provision, all of the following may be part of the agreement between the insured and the insurer, except: A. Statements made to the applicant by the producer during the application process B. A copy of the application C. Any riders or endorsements D. The policy

Statements made to the applicant by the producer during the application process *The Entire Contract Provision (a Mandatory Uniform Provision) stipulates that the policy, a copy of the application, and any riders or endorsements constitute the entire contract between the insurer and insured.

What is the result of an insured not receiving a claim form within the time period allotted after submitting a notice of claim? A. The claim is automatically accepted B. The insured can submit written proof of the loss C. The claim is automatically denied D. The insurer must add a 10% penalty to any amount eventually paid

The insured can submit written proof of the loss *The claim form must be received by the insured from the company within 15 days after notice of claim. If forms are not furnished, the insured may submit written proof of occurrence, character, and extent of loss.

Which statement is inaccurate regarding the Change of Occupation Provision? A. If the insured changes to a more hazardous occupation, benefits will be reduced to the amount which the premiums paid would purchase at the more hazardous occupation B. If the insured changes to a less hazardous occupation, he/she may apply for a rate reduction C. The insured must notify the insurer of a change of occupation, or the policy will be cancelled D. If the insured works at two occupations, rates for the most hazardous occupation will be charged

The insured must notify the insurer of a change of occupation, or the policy will be cancelled *Failure to notify the insurer of a change of occupation will not result in cancellation of the policy.

Which of the following best describes the consideration on the part of an insurer? A. The promise to pay in the event of a covered claim B. The purpose of the contract must be legal C. The offer of the contract D. The acceptance of the contract

The promise to pay in the event of a covered claim *Consideration is something promised, given, or done that has the effect of making an agreement a legally enforceable contract.

Which of the following is not a Mandatory Uniform Provision of an Accident and Health policy? A. Payment of Claims B. Proof of Loss C. Waiver of Premium D. Time Limit on Certain Defenses

Waiver of Premium *The other choices are Mandatory Uniform Provisions. Waiver of Premium is a provision that may or may not be included.

Harry was hospitalized and in a coma for 6 months. When does proof of loss for this claim have to be submitted? A. Within 2 years, covered under the contestable period B. Anytime, since he was in a coma and obviously could not submit a claim C. An executor would be appointed by the courts to handle the necessary paperwork D. Within 1 year, unless he suffers legal incapacity

Within 1 year, unless he suffers legal incapacity *The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must provide proof of the loss within 90 days of the loss, or within in the shortest time possible, but not to exceed 1 year unless the insured suffers legal incapacity. Since Harry was in a coma for 6 months, it would not have been possible for him to file a claim within the 90-day time period.

Does the insured have the right to change the beneficiary designation of a health insurance policy? A. Yes, unless the beneficiary is designated as irrevocable B. No, only the insurer has that right in health policies C. No, the beneficiary designation in health policies is always irrevocable D. Yes, the beneficiary designation is always revocable in health policies

Yes, unless the beneficiary is designated as irrevocable *The Change of Beneficiary Provision (a Mandatory Uniform Provision) establishes the insured's right to change the beneficiary, unless it is designated as irrevocable.