D2. Individual Accident and Health Insurance General Policy Provisions

  1. A producer has just been told by a policyholder that they are 10 years younger than was listed on the application. The producer should:



    • C) Notify the insurance company to adjust the existing policy to the correct age
    • Don't read into the question. It doesn't say that a claim occurred. If a producer finds something is incorrect on the application, the insurer should be notified.
  2. If an insurance company fails to notify an applicant that a reinstatement application was not approved, insurance will be placed back in force within how many days:



    A) 45
  3. All of the following statements about the Cancellation Provision in a health policy are true, EXCEPT that the insurance company:



    • D) Is not obligated to refund the unearned premium upon cancellation
    • Earned premiums do not have to be refunded, but unearned premiums do. For example, if your annual premium is $1,200 (which you paid in advance) and the company cancels you after six months, they can keep $600 (the earned) but they must refund $600 (the unearned). Insurers must give advance notice when canceling, but insureds may cancel at any time. Insurer cancellations are calculated pro-rata (no penalty), but cancellations requested by insureds are calculated on a short-rate basis (with a % penalty for the paperwork).
  4. When a health insurance policy can be non-renewed by the insurer at the end of any policy period, the policy is considered to be:



    • C) Optionally renewable
    • An insurer may or may not renew an optionally renewable policy.
  5. The insured is required to submit a Notice of Claim to the insurance company within how many days after a loss:



    • B) 20
    • Notice of Claim must be submitted to the insurer within 20 days, or a reasonable time. Claim forms must be sent to the insured within 15 days. Proof of Loss must be submitted to the insurer within 90 days. Claims must be paid immediately. If they are not paid within 60 days, the insured may sue.
  6. Mr. Smith, who has net earned income of $3,000 a month, has a disability income policy with Company A with a monthly benefit of $3,000 and another policy with Company B that also has a monthly benefit of $3,000. Under the Insurance with Other Insurers provision, Company A will pay a monthly maximum of $______ if Mr. Smith becomes totally disabled:



    • D) $1,500
    • Under the "Other Insurance with Other Insurers" provision, each insurer would pay their proportionate share of this claim. However, that portion of the premium paid by the insured for the benefits that they are not entitled to must be refunded by each insurer. This provision reinforces the Principle of Indemnity by keeping the insured from collecting more than they actually lost.
  7. How many days must an insured wait after submission of Proof of Loss before taking legal action against an insurance company:



    • B) 60
    • Insurance companies have 60 days to investigate a claim. After that time, a claimant may take legal action if they have not paid.
  8. All of the following are correct regarding the various mandatory provisions that must be included in all individual health insurance policies, EXCEPT:



    • C) An insured should give "notice of claim" as soon as possible, but no later than 10 days
    • On individual health insurance policies, insureds have up to 20 days to give notice of claim to the insurer.
  9. A 40-year-old is insured under a $500-per-month Disability Income policy that contains a Change of Occupation Provision. After their policy was issued, they changed their occupation from insurance producer to farmer without notifying the insurance company and they were recently injured. What would they most likely receive from the insurance company:



    • D) Less than $500 per month
    • You must assume that they did not notify the company of their change in occupation and that being a farmer is more hazardous than being a producer. Since the policy does contain the optional Change of Occupation Provision, the insurer may adjust benefits to what the correct premium would have bought.
  10. Under a Guaranteed Renewable disability policy, the insurance company may:



    • C) Change premium rates if all other policies in that class within that state are changed
    • Nothing may be changed on a Guaranteed Renewable disability policy except the rates by "class" only. Classes are defined in the policy, such as age group classes or occupational classes. Individual rates may not be changed.
  11. A cancelable health insurance policy can be cancelled by:



    • D) The insured or the insurer
    • A Cancelable health insurance policy can be cancelled by either the insurer or the insured.
  12. An insured's individual health insurance policy was reinstated effective June 1st. On June 8th the insured became ill, was hospitalized and returned to work June 15th. The insured's policy would provide:



    • C) No benefits
    • Health insurance policies contain a 10-day probationary period upon reinstatement. It only applies to sickness, not accidents. Thus, any sickness occurring within the first 10 days of a reinstated policy would not be covered since the insurer considers it to be pre-existing.
  13. The Legal Actions Provision of a disability policy requires that:



    • A) An insured wait at least 60 days after submission of Proof of Loss before initiating a lawsuit
    • Insurers are supposed to pay health insurance claims immediately. However, they do have 60 days after Proof of Loss to conduct an investigation. If they do not pay after 60 days, the claimant may file a lawsuit or take legal action.
  14. All of the following are true about mode of payment, EXCEPT:



    • D) The annual premium payment mode has the highest cost due to the service charge
    • The "mode" is defined as the frequency of premium payment. The annual mode of payment is cheapest since it has no service charges. Grace periods on health insurance are seven days if you pay your premium weekly, 10 days if you pay monthly and 31 days if you pay any other way (quarterly, semiannually, or annually).
  15. On health insurance, the incontestability clause is also known as the:



    • C) Time limit on certain defenses clause
    • Like Life insurance, Health insurance policies are also contestable for two years if the insured lied about a material fact on their application. After two years, a Health policy is incontestable, except for fraud. The incontestability clause is also known as the "time limit on certain defenses clause." A material fact, if known, is one that would have caused the policy to be issued with substantial differences in its terms, conditions and/or coverage.
  16. The optional provision that reinforces the Principle of Indemnity and prevents an insurer from paying a Disability Income claim in excess of what the insured actually lost is known as:



    • B) Relation of earnings to insurance
    • Relation of Earnings to Insurance is an optional provision that reinforces the Principle of Indemnity and prevents the insurance company from paying a Disability Income claim in excess of what the insured actually lost. For example, if the insured's net earned income is $3,000 per month and they bought 2 policies with the same insurer with limits of $3,000 each, one policy would pay and the other would be voided, and its premium returned. However, if they bought 2 $3,000 policies, each with a different insurer, the insurers would share the claim proportionately by paying $1,500 each, and returning the premiums paid for the excess coverage.
  17. Which statement about the optional Change of Occupation Provision in a Disability Income policy is true:



    • C) It sets forth the rights and obligations of the insurance company and the insured in the event the insured engages in a more hazardous or less hazardous occupation
    • This optional provision allows the insurer to adjust benefits up or down, if the insured has changed to a more hazardous or less hazardous occupation without notifying the insurance company.
  18. The purpose of the Illegal Occupation Provision is to:



    • D) Absolve an insurance company from liability for a loss incurred by an insured during their commission of a felony
    • The Illegal Occupation Provision is like an exclusion, in that it states that no coverage applies if the insured is injured during the commission of a felony.
  19. Under the Uniform Provisions Law, which of the following provisions is optional for an A&H policy:



    • C) Change of Occupation
    • Uniform (standard) provisions are regulated by state law. Mandatory provisions usually protect the insured (such as the grace period) and optional provisions usually protect the insurer (such as change of occupation). Without this provision in the policy, the insurer could not adjust benefits if the insured changed to a more hazardous occupation without telling the insurer or producer.
  20. How long does an insurer have to provide an insured claim forms:



    • C) 15 days
    • The insurer has up to 15 days from when they receive notice of claim from the insured. If they do not provide the insured claim forms during this time period, the insured can submit proof of loss in writing.
  21. Pre-existing conditions are referred to in which required disability policy provisions:



    • A) Time Limit on Certain Defenses
    • The Time Limit on Certain Defenses Provision is another name for the Incontestability Clause. If you fail to mention a pre-existing condition on your application, a claim occurring in the first two years may be contested. After two years, health insurance policies are incontestable, except for fraud.
  22. If a disability income policy has a change of occupation provision and the insured changes to a less hazardous occupation, the:



    • D) Benefits will increase
    • Change of Occupation is an optional provision on a disability income policy that allows the insurer to change the benefits if the insured changes to either a more risky or less risky occupation. If an insured changes to a less risky occupation, their benefits would increase. If they change to a more risky occupation, their benefits would decrease.
  23. Under the Misstatement of Age clause on a Disability Income policy, if the insured states that their age is lower than it actually is:



    • A) Benefits will be reduced
    • Most insurers who write Disability Income insurance include an optional provision known as Misstatement of Age, which protects the insurer from those who lie about their age in order to get a lower rate. If the insured stated that their age is lower than it actually is, their benefits will be reduced in the event of a claim. In other words, the insurer will not pay more in benefits than the premium paid would have purchased had the correct age been known.
  24. Insurance companies are required to do all of the following, EXCEPT:



    • B) Cover unsubstantiated claims
    • The insurer is required to send claim forms to the insured within a certain number of days (usually 15) after receiving notice of claim. The insurer is also required to pay valid claims. Claims that are not evidenced by actual proof of loss (unsubstantiated claims) are not covered. However, if the insurer does deny a claim, they are required to notify the insured what the denial of claim is based upon.
  25. Once the insurer receives notice of a claim from the insured, the insurer is responsible for:



    • C) Sending the insured claim forms
    • Claims conditions in health insurance require that the insurer submit claim forms to the insured once notice of claim has been received. If the insurer does not send claims forms to the insured within a certain number of days (usually 15) the insured has the right to submit proof of loss on any form. Remember, the insurer will NOT pay a claim after receiving notice of claim. The insurer wants proof that the loss occurred and will not pay the claim until they receive it. Once proof of loss is submitted the insurer must either pay the claim, or deny coverage (time payment of claims). If the insurer denies coverage and the insured disagrees, the insured has the right to sue (legal actions).
  26. The Misstatement of Age Provision gives the insurance company the right to:



    • C) Adjust benefits payable
    • This provision works the same on disability as it does in life insurance. It protects the insurer against a client who states their age as younger than it really is to obtain a lower premium. In the event of a claim, the insurer will adjust benefits to what the correct premium would have bought.
  27. The policy provision that prevents an insurance company from altering its agreement with a policyholder by referring to documents or other items not contained in the policy is called the:



    • D) Entire Contract Provision
    • This mandatory provision states: "This policy, including the endorsements and attached papers, if any, constitutes the entire contract." No producer has the authority to change this policy or waive any provisions. No change in the policy shall be effective until approved by a company officer.
  28. The Entire Contract Provision in a health policy states:



    • D) The policy, with attached endorsements and other papers, constitutes the Entire Contract between the policyholder and the insurance company
    • The Entire Contract Provision is required by state law and is designed to protect the insured by preventing the insurer from making unilateral changes in the policy after it has been issued.
  29. On an individual medical expense insurance policy, a claimant must submit proof of loss within:



    • C) 90 days
    • Individual health insurance policies contain certain mandatory uniform provisions, which cannot be changed by endorsement. Notice of claim is 20 days, claim forms must be sent within 15 days and proof of loss must be submitted within 90 days of the loss.
  30. The Time of Payment of Claims Provision requires that an insurance company pay Disability Income benefits no less frequently than:



    • D) Monthly
    • This is a mandatory policy provision required by state law requiring Disability Income payments be made at least monthly.
  31. A customer is injured in an accident on September 30th. If their policy lapsed on October 1st and they turn in the claim on October 8th, their health insurer will:



    • D) Pay the claim
    • Since the policy was still in force on the date of the accident, the insurer must pay this claim. Unpaid premiums are only subtracted from claims that occur during the grace period.
  32. If a 50 year-old bought a policy that states their premium could never be changed, they must have purchased a:



    • A) Noncancellable policy
    • A noncancellable policy cannot be cancelled and the policy premium cannot be increased.
  33. The purpose of the Time Limit on Certain Defenses Provision is to limit the time during which the:



    • A) Insurance company can challenge the contract because of material misstatements in the application
    • The Time Limit on the Certain Defenses Provision is another name for the Incontestability Clause. It protects the insurer for the first two years against material misstatements by the client. After two years, it protects the client, although health policies are always contestable for fraud, even beyond two years.
  34. When a customer buys two disability income policies from the same insurer, the "other insurance with this insurer" clause states that in the event of a claim:



    • C) One policy is primary and the other policy is excess
    • To reinforce the Principle of Indemnity, most disability income policies contain an "other insurance" clause. If an insured over-insures by buying two policies from the same insurer, one policy will be considered to be primary and the other excess, if needed. However, if the insured over-insures by buying two policies from different insurers, both companies will pay the claim on a pro-rata (or proportionate) basis. Premiums paid for the coverage for which the insured is not entitled must be refunded.
  35. Which statement about the Time Limit on Certain Defenses Provision is true:



    • B) It may prohibit an insurance company from denying a claim on the basis of misstatements in an application
    • The Time Limit on Certain Defenses Clause is a mandatory provision, protecting the insurer for the first two years and the insured thereafter. After two years, a health policy is incontestable except for fraud, which is very hard to prove.
  36. If the insured is not entirely satisfied with the policy issued, they may return it to the insurance company for voiding and receive a refund of premium at which of the following times:



    • C) Within a specified period from the date the insured receives the contract
    • The Free Look starts at policy delivery. It is usually 10 days, but is 30 days on certain policies, such as Long Term Care and Medicare Supplements.
Author
EdiesTeam
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317784
Card Set
D2. Individual Accident and Health Insurance General Policy Provisions
Description
Individual Accident and Health Insurance General Policy Provisions HEALTH AND DISABILITY
Updated