Ch. 6 Health Insurance Policy Provisions
The Consideration Clause in an insurance contract contains what pertinent information?
Amount of premium payments and when they are due.
B purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What type of rider is this?
Guaranteed Insurability Rider
Which Accident and Health policy provision addresses preexisting conditions?
Time Limit on Certain Defenses
Monthly-premium individual health insurance policies must provide a grace period of at least:
10 days
Insurers may request a hearing within _______ if their policy is rejected: -20 days -30 days -60 days -90 days
20 days
What action is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral Assignment
The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is:
Time Limit on Certain Defenses
When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates?
change of occupation provision
The agreement in an insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called:
insuring agreement.
Mandatory 9. Payment of Claims:
specifies how and to whom claim payments are to be made. Two optional provisions the insurers may add: One gives the insurer the right to expedite payment of urgently needed claim funds and pay up to $3,000 in benefits to a relative or individual who is considered to be equitably entitled to payment. The other allows the insured to assign medical benefits (pay directly) to the hospital or physician rendering the covered services.
Mandatory 12. Change of Beneficiary:
the insured, as policyowner, may change the beneficiary designation at any time, unless a beneficiary has been name irrevocably.
An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision?
31
The Notice of Claims provision requires a policyowner to:
Notify an insurer of a claim within a specified time.
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
The full face amount
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material.
What is the Suicide provision designed to do?
safeguard the insurer from an applicant who is contemplating suicide.
The provision that defines to whom the insurer will pay benefits to is called:
Payment of Claims
What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's Claims Forms provision?
Submit the claim in any form.
The guarantee of insurability option provides a long-term care policyowner the ability to:
Buy additional coverage at a later date
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
P is the insured on a participating insurance policy. Which statement is true if P's premiums are waived due to a disability? -P cannot borrow against the policy's cash value while disabled -P will have to pay income taxes on the amount of the premiums waived -P will still receive declared dividends -P cannot assign ownership of the policy while premiums are being waived.
P will still receive declared dividends
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium.
K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?
Reinstatement
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider.
In insurance policies, a waiver of premium provision keeps the coverage in force without premium payments when?
after an insured has become totally disabled as defined in the policy.
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
$50,000
An insured must notify an insurer of a medical claim within how many days after an accident?
20
M's insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force?
45 days.
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of:
Additional Whole Life coverage at specified times.
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will:
Adjust the death benefit to a reduced amount.
Mandatory 7. Proof of Loss:
After a loss occurs, or after the company becomes liable for periodic payments, the claimant has 90 days in which to submit proof of loss. The time limit is one year after the company has become liable for the loss; the only exception occurs when the claimant does not have the legal capacity to comply.
Which of the following statements BEST describes what the Legal Actions provision of an Accident and Health policy requires? -An insured must settle a claim within 60 days of Proof of Loss is submitted -An insured must wait at least 30 days after Proof of Loss has been submitted before a lawsuit can be filed. -An insured must wait at least 60 days after Proof of Loss has been submitted before a lawsuit can be filed. -An insured must settle a claim within 30 days after Proof of Loss is submitted.
An insured must wait at least 30 days after Proof of Loss has been submitted before a lawsuit can be filed.
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take? -Beneficiary will be denied the claim -Beneficiary will be denied the claim and refunded all paid premiums -Beneficiary will be paid the Death Benefit -Beneficiary will be paid a partial Death Benefit
Beneficiary will be paid the Death Benefit
P is a Major Medical policyowner who is hospitalized as a result of injuries sustained from participating in a carjacking. How will the insurer most likely handle this claim?
Claim will be denied
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied.
A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
Claim will be paid and coverage will remain in force.
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
Claims are denied under the Suicide clause of the policy.
An insurance company receives E's application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet? -Entire Contract clause -MIB clause -Insuring clause -Consideration clause
Consideration Clause
Which statement reading the Misstatement of Age provision is considered to be true? -Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered -Required that a new policy must be applied for if a misstatement of age is found on the current policy -Misstatement of Age provision is valid only during the contestable period -Insurer may void the policy if a misstatement of age is discovered.
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy? -Waiver -Exceptions and Reductions -Incontestable -Entire Contract
Entire Contract
Which of the following policy provisions states that the producer does NOT have the authority to change the policy or waive any of its provisions? -Time Limit on Certain Defenses -Reinstatement -Entire Contract -Change of Beneficiary
Entire Contract
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire Contract
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?
Entire Contract (requires the application is part of the policy)
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the:
Entire Contract provision
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? -Coverage can be added at specific events such as marriage or having a child -Evidence of insurability is not required when the option is exercised -Evidence of insurability is required when the option is exercised -Coverage can be added at specific ages
Evidence of insurability is required when the option is exercised
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
Exclusion
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n):
Exclusion
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
File written proof of loss.
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums.
With any insurance policy, what is the purpose of the Grace Period?
Gives the policyowner additional time to pay past due premiums.
Which of the following provisions specifies how long a policyowner's insurance coverage will remain in effect if the policyowner does not pay the premium when it is due? -Grace Period -Consideration -Waiver of Premium -Reinstatement
Grace Period
All of these statements about the Waiver of Premium provisions are correct EXCEPT: -a waiting period must pass before becoming eligible for benefits -a Waiver of Premium is available on both permanent and term insurance policies -Insured must be eligible for Social Security disability for claim to be accepted -Insured must be totally disabled to qualify
Insured must be eligible for Social Security disability for claim to be accepted
Which of the following insurance policy provisions specifies the benefits or services a policy will provide? -Insuring clause -Usual, Customary, and Reasonable clause -Consideration clause -Benefit clause
Insuring clause
Mandatory 6. Claim Forms:
It is the company's responsibility to supply a claim form to an insured within 15 days after receiving notice of claim.
D, the beneficiary under her husband's AD&D policy, submits an accidental death claim on May 1, 2010 following his death. However, the company denies the claim on the basis that death was due to natural causes. She decides to talk to her attorney. What is the earliest date for taking legal action against the insurer?
July 1, 2010 (an insured must wait 60 days after submitting Proof of Loss before filing a lawsuit)
Which of these is NOT considered to be a right given to a policyowner? -Surrendering the policy's cash value -Modify a provision in the insurance contract -Assignment of ownership -Change the beneficiary, if revocable.
Modify a provision in the insurance contract.
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options? -Annually -Semiannually -Quarterly -Monthly
Monthly
Which of the following statements is CORRECT about accelerated death benefits? -The full face amount is available as an accelerated benefit -Those on Social Security disability automatically qualify for this benefit -This provision is usually provided with an increase in premium -Must have a terminal illness to qualify
Must have a terminal illness to qualify
J purchased a Disability Income Policy that ONLY J can terminate and on which the rates will never increase above those illustrated in the policy. Which of the following types of policies did J purchase?
Noncancellable
What type of renewability guarantees premium rates and renewability?
Noncancellable
What is considered to be a characteristic of a Conditionally Renewable Health Insurance?
Premiums may increase at the time of renewal.
What is the purpose of the Time of Payment of Claims provision?
Prevents delayed claim payments made by the insurer.
The Consideration clause in an insurance policy indicates that a policyowner's consideration consists of a completed application and:
The initial premium
G is involved in an automobile accident as a result of driving while intoxicated and suffers numerous injuries. According to the Intoxicants and Narcotics exclusion in G's policy, who is responsible for paying the medical bills?
The insured
T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim's validity. The provision that limits the time period during which the company may dispute a claim's validity is called:
Time Limit on Certain Defenses
Insuring Clause:
a broad statement on the first page of the health policy stipulating conditions under which benefits are to be paid.
Mandatory 4. Reinstatement:
a policy that has lapsed may be reinstated. Reinstatement is automatic if the delinquent premium is accepted by the company or its authorized agent and the company does not require an application for reinstatement.
Which of the following statements describes what an Accident and Health policyowner may NOT do? -file a covered claim -assign ownership -cancel the coverage -adjust the premium payments
adjust the premium payments
Optional 5. Insurance with Other Insurers:
allows an insurer to pay benefits to the insured on a pro-rata basis when the insurer was not notified prior to the claim that the insured has other health coverage.
Optional 2. Misstatement of Age:
allows the insurer to adjust the benefit payable if the age of the insured was misstated when application for the policy was made. The older the applicant is, the higher the premium.
Optional 9. Conformity with State Statutes:
any policy provision that is in conflict with states statutes in the state where the insured lives at the time the policy is issued is automatically amended to conform with the minimum statutory requirements.
When does a Probationary Period provision become effective in a health insurance contract?
at the policy's inception.
The incontestable clause allows an insurer to:
contest a claim during the contestable period.
Owner's Rights Provisions:
defines the person who may name and change beneficiaries, select options available under the policy, and receive any financial benefits from the policy.
Mandatory 5. Notice of Claim:
describes the policyowner's obligation to the insurer to provide notification of loss within a reasonable period of time. Typically the period is 20 days after the occurrence or a commencement of the loss, or as soon thereafter as is reasonably possible.
Mandatory 10. Physical Exam and Autopsy:
entitles a company, at its own expense, to make physical examinations of the insured at reasonable intervals during the period of a claim. In the case of death, the insurer has the right to conduct an autopsy on the body of the insured, provided it is not forbidden by state law.
Insurance benefits NOT covered due to an act of war are:
excluded by the insurer
Optional 8. Cancellation:
gives the company the right to cancel the policy at any time with 45 days' written notice to the insured.
Optional 7. Unpaid Premiums:
if there is an unpaid premium at the time a claim becomes payable, the amount of the premium is to be deducted from the sum payable to the insured or beneficiary. Or, if the premium is covered by a note when a claim is submitted, the note payment will be deducted from the amount payable for the claim.
Mandatory 1. Entire Contract:
includes the actual policy and the application. It protects the policyowner in two ways: 1)states that nothing outside of the contact can be considered part of the contract. (Nothing "incorporated by reference) 2) assures the policyowner the 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.
Which of these is considered a mandatory provision? -payment of claims -insurance with other insurers -misstatement of age -change of occupation
payment of claims
Free Look:
permits policyowners 10 days in which to examine their new policies at no obligation.
Which of these statements accurately describes the Waiver of Premium provision in an insurance policy? -past due premiums on a lapsed policy are waived and coverage is restored -the insured is paid a monthly benefit to keep insurance premiums current in the event of total disability -premiums are waived after the insured has been unemployed for a specific time period -premiums are waived after the insured has been totally disabled for a specified amount of time
premiums are waived (or paid) after the insured has been totally disabled for a specified amount of time
The Legal Actions provision of an insurance contract is designed to do all of the following EXCEPT: -provide the insurer adequate time to research a claim -protect the insured from having claim research delayed -protect the producer -give the insured guidelines for pursuing legal action against an insurer
protect the producer
Mandatory 8. Time of Payment of Claims:
provides for immediate payment of the claim after the insurer receives notification and proof of loss. If the claim involves disability income payments, they must be paid at least monthly, if not at more frequent intervals specified in the policy.
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? -payor clause -automatic premium loan provision -reinstatement provision waiver of premium.
reinstatement provision
Optional 1. Change of Occupation:
sets forth the changes that may be made to premium rates or benefits payable if the insured changes occupations. This provision allows the insurer to reduce the maximum benefits payable under the policy if the insured changes to a more hazardous occupation, or to reduce the premium rate charged if the insured changes to a less hazardous occupation.
Which of the following provisions is NOT required in HMO contracts or certificates? -enrollment -rates shall not be excessive -no preexisting exclusions for children -seven-day grace period
seven-day grace period (HMOs must provide a grace period of at least 10 days)
Optional 10. Illegal Occupation:
specifies that the insurer is not liable for losses attributed to the insured's commission of, or being connected with, a felony or participation in any illegal occupation.
Optional 4. Insurance with Other Insurer:
states that benefits payable for expenses incurred will be prorated in cases where the company accepted the risk without being notified of other existing coverage for the same risk. When premiums are paid that exceed the amount needed to cover the amount the company determines it will pay, the excess premiums must be refunded to the policyowner.
Optional 6. Relation of Earnings to Insurance:
states that the insurer is liable only for that proportionate amount of benefits as the insured's earnings bear to the total benefits under such coverage. Total indemnities payable to the insured may not be reduced below $200 or the sum total benefits under all applicable coverage, whichever is less. Any premiums paid for the excess coverage are refunded.
Consideration Clause:
states the amount and frequency of premium payments. Frequently, the consideration clause also lists the effective date of the contract and defines the initial term of the policy. In addition, it may specify the insured's right to renew the policy.
Which of the following statements describes the purpose of the Insuring clause in an insurance policy? -Specifies the additional time given to pay past due premiums -States the scope and limits the coverage -Specifies a claim will be paid immediately upon receipt of proof of loss -Prohibits the insured from suing the insurer for at least 60 days after filing a written proof of loss.
states the scope and limits of the coverage.
Mandatory 11. Legal Actions:
the insured cannot take legal action against the company in a claim dispute until after 60 days from the time the insured submits proof of loss. The same rule applies to beneficiaries. The time limit for a legal action provision in a contract is limited to no more than 5 years.
Optional 11. Intoxicants and Narcotics:
the insurer is not liable for any loss attributed to the insured while intoxicated or under the influence of narcotics, unless such drugs were administered on the advice of a physician. -losses due to injuries sustained while committing a felony, or attempting to do so, also may be excluded. -foreign travel may not be excluded in every instance, but extended stays overseas or foreign residence may cause a loss of benefits.
J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age as stated on the application five years ago was found to be understated by ten years. Which of the following actions will the insurance company take? -the insurer will pay the original benefit stated in the policy -the insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age -the insured will pay the original face amount minus any premium deficiencies owed -the insurer will deny the claim and refund premiums paid
the insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age.
Mandatory 2. Time Limit on Certain Defenses:
the policy is incontestable after it has been in force a certain period of time, usually 2 years. The insurance company cannot deny a claim on the basis on a preexisting condition after expiration of the stated contestable period unless such preexisting condition has been excluded specifically from the policy by name or description.
Mandatory 3. Grace Period:
the policyowner is given a number of days after the premium due date during which time the premium payment may be delayed without penalty and the policy continues in force.
Optional 3. Other Insurance in This Insurer:
the purpose is to limit the company's risk with any individual insured. The total amount of coverage to be underwritten by a company for one person is restricted to a specified maximum amount, regardless of the number number of policies issued.
If an individual has an Accidental Death and Dismemberment policy and dies, an autopsy can be performed in all these situations EXCEPT: -when the cause of death is unknown -when the state prohibits this by law -when consent for the autopsy is not obtained -when foul play was a contributing factor
when the state prohibits this by law.
What does the ownership clause in a life insurance policy state?
who the policyowner is and what rights the policyowner is entitled to.