Chapter 7: Health Policy Provisions, Clauses, And Riders

Question 1

Guaranteed renewable

Answer 1

A policy that is written on a non-cancellable basis with the right to renew guaranteed.

Question 2

Irrevocable beneficiary

Answer 2

A beneficiary who has a vested interest in the policy and therefore, the policy owner may not exercise certain rights without the consent of the beneficiary.

Question 3

NAIC [National Association of insurance commissioners]

Answer 3

And organization composed of insurance commissioners from all 50 states, the district of Columbia and the 4 U.S. territories, formed to resolve insurance regulatory issues.

Question 4

Total disability

Answer 4

Inability of the insured to perform any occupation for which he or she is reasonably suited by reason of education, training or experience.

Question 5

Waiver [The voluntary abandonment of a known or legal right or advantage by an insurer]

Answer 5

Relinquishment of a right or interest.

Question 6

What is the uniform individual accident and sickness policy provisions law?

Answer 6

This law established standard provisions that are to be included in our individual health insurance policies. Although the wording may be far from one in sure to another, the basic provisions are the same.

Question 7

Entire contract provision

Answer 7

The entire contract provision states that the health insurance policy, together with a copy of the signed application and attached riders and amendments, constitutes the entire contract.

Question 8

Grace Period Provision

Answer 8

The grace period is the period of time after the premium due date in which premiums may still be paid before the policy lapses for non-payment of the premium.

Question 9

What are the typical grace periods, all though they differ according to individual state laws?

Answer 9

seven days for weekly premium policies [industrial policies]; 10 days for monthly premium policies; and 31 days for all other modes. Coverage will continue in force during the grace period.

Question 10

Reinstatement Provision

Answer 10

This provision stipulates under what conditions the insured may reinstate coverage if the premium has not been paid by the end of the policy’s grace period because the policy has terminated.

Question 11

When is reinstatement automatic?

Answer 11

Reinstatement is automatic if the company or an authorized representative accepts the policy premium and does not require a reinstatement application.

Question 12

What is covered immediately following the reinstatement and what is covered only after 10 days?

Answer 12

Accidents will be covered immediately following the reinstatement; however, sickness is covered only after 10 days. This helps to protect the insurer from adverse selection.

Question 13

Change of beneficiary provision

Answer 13

The change of beneficiary provision stipulates that the policy owner may change the beneficiary at any time by providing a written request to the insurer, unless the beneficiary is designated as irrevocable.

Question 14

Claims procedures provision

Answer 14

The notice of claim provision spells out the insurance duty to provide the insurer with reasonable notice in the event of a loss. Notice is required within 20 days of the loss. Notice to the agent equals notice to the insurer.

Question 15

Upon receipt of a notice of claim, the company must supply what to the insured within a specified number of days which is usually how many days?

Answer 15

Upon receipt of a notice of claim, the company must supply claims forms to the insured within a specified number of days [usually 15 days], but may vary from state to state.

Question 16

After a loss occurs, the claimant must submit proof of loss within how many days of the loss?

Answer 16

The claimant must submit proof of loss within 90 days of the loss, but not to exceed one year. However, the 1-year limit does not apply if the claimant is not legally competent to comply with this provision.

Question 17

Explain the time of payment of claims provision

Answer 17

The time of payment of claims provision specifies that claims are to be paid immediately upon written proof of loss. The time of payment for claims is usually specified in different policies as 60 days, 45 days, or 30 days. However if the claim involves disability income benefits, the benefits must be paid in not less frequently than monthly.

Question 18

What is the facility a payment clause?

Answer 18

Some policies allow a provision that gives the insured the right to expedite payments of urgently needed claim funds and pay up to a specified limit in benefits to a relative or individual who is considered to be equitably entitled to payment.

Question 19

Explain Physical examination and autopsy provision

Answer 19

The physical exam and autopsy provision gives the insurer the right to examine the insured, at its own expense, as often as may be reasonably necessary why a claim is pending. The insurer also usually has the right to conduct an autopsy, if not for bidden by a state law.

Question 20

What is the time limit on certain defenses provision?

Answer 20

The time limit on certain defenses provision is similar to the incontestability provision. No statement or misstatement (except fraudulent misstatements) made in the application at the time of issue will be used to deny a claim after the policy has been in force for 2 years.

Question 21

Explain may not be reduced or denied.

Answer 21

A claim for loss incurred or disability commencing after two years from the date of policy issue may not 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 of this policy.

Question 22

Legal actions provision

Answer 22

This provision limits the time in which they claim it makes seek recovery from an insurer under the policy. The insured must wait 60 days, but not later than three years [in most states] at the proof of loss, before legal action can be brought against the company.

Question 23

Misstatement of age or sex provision

Answer 23

If the insured misstated his or her age or gender at the time of application, the benefits paid under the policy would be adjusted to what the premium paid would have been purchased at the correct age.

Question 24

Change of occupation provision

Answer 24

Provision that allows insurer to adjust benefits if the insured changes occupations. Benefits can be reduced if the change is to a more hazardous occupation.

Question 25

Illegal occupation provision

Answer 25

This provision states that liability will be denied if the insured is injured while committing an illegal act or is engaged in an illegal occupation.

Question 26

Explain The relation of earnings to insurance provision.

Answer 26

The relation of earnings to insurance provision allows the insurance company to limit the insured’s benefits to his/her average income over the last 24 months.

Question 27

All individual health insurance policies are required to include certain standard provisions called what?

Answer 27

uniform mandatory provisions

Question 28

Insuring Clause

Answer 28

The insuring agreement or clause identifies the insured and the insurance company and states what kind of loss is covered.

Question 29

What is the free-look period provision and how long is it?

Answer 29

The free-look all right to examine provision allows the insured a period of several days to look over the policy, and if dissatisfied for any reason, return for a full refund. It is commonly 10 days from the date the policy is delivered.

Question 30

What is the consideration clause?

Answer 30

The consideration clause makes it clear that both parties to the contract must give some valuable consideration. The payment of premium and the statements on the application are the consideration given by the applicant. The promise to pay is that insurers consideration

Question 31

What is the probationary period Provision?

Answer 31

The probationary period Provision states that a period of time must lapse before coverage for specify conditions goes into effect. This provision is most commonly found in disability income policies and it also applies to new employees who must wait a certain period of time before they can enroll in the group plan. The purpose of this visit is to avoid unnecessary administrative expenses in case of employee turnover.

Question 32

What is the waiver of premium provision or rider?

Answer 32

The waiver of premium provision or rider is usually included with guaranteed renewable and noncancelable disability income policies.

It provides that in the event of permanent and total disability, premiums will be wasteful of the ration of the disability. Insured must be totally disabled for usually 3 to 6 months. During these months, premiums must still be paid and any premiums paid will be refunded. This rider expires when the insured attains age 65.

Question 33

What are pre-existing conditions?

Answer 33

Pre-existing conditions are conditions for which the insured has received diagnosis, advice, care, or treatment during a specific time period prior to the application for health coverage.

Question 34

What does the coinsurance provision provide?

Answer 34

Most major medical policies include a coinsurance provision that provides for the sharing of expenses between the insured and the insurance company.

At the insured satisfies the policy deductible, the insurance company we usually pay the majority of the expenses, typically 80%, with the insured paying the remaining 20%.

Question 35

What is the purpose of the coinsurance provision for the insurance company?

Answer 35

To control costs and discourage overutilization of the policy.

Question 36

What is a stop-last limit?

Answer 36

The stop-loss limit is a specified dollar amount beyond which the insured no longer participate in the sharing of expenses. The insurance company pays 100% of the expenses that are above the specified stop-loss limit.

Question 37

What is a copayment provision?

Answer 37

A copayment provision is similar to the coinsurance feature in that the insured shares part of the cost for services with the insurer. Unlike coinsurance, a copayment has a set dollar amount that the insured will pay each time certain medical services are used.

Question 38

What is a deductible?

Answer 38

A deductible is a specified dollar amount that the insured must pay first before the insurance company will pay the policy benefits.

The larger the deductible, the lower the premiums that are required to be paid.

Question 39

What is a carry-over provision?

Answer 39

This provision states that if the insured did not incur enough expenses during the year to meet the deductible, any expenses incurred during the last three months may be carried over to the next policy year to satisfy the new annual deductible.

Question 40

What are exclusions?

Answer 40

Exclusions are causes of loss, exposures, conditions, etc. listed in the policy which are not covered and with no benefits payable.

Exclusion specify what the insurer will not pay.

Question 41

What are reductions?

Answer 41

Reductions are a decrease in benefits because of certain specified conditions. The most common exclusions and health insurance policies are injury or loss that results from war; military duty; self-inflicted injury; dental expense; cosmetic medical expenses; eye refractions; or care in government facilities.

Question 42

What does usual, reasonable, and customary (URC) charges mean?

Answer 42

(URC) charges means that the insurance company will pay an amount for a given procedure based upon the average charge for that procedure in that specific geographic area.

Question 43

What is a lifetime limit?

Answer 43

The lifetime limit specifies a benefit amount that is the most a policy will pay during the lifetime of the insured.

Question 44

What is an annual limit?

Answer 44

In annual limit is the most a policy will pay each year that policy is in force.

Question 45

What is a per-cause limit?

Answer 45

The per-cause limit is the most a policy will pay for expenses incurred for the same or related causes.

Question 46

What is an impairment (exclusion) rider?

Answer 46

The impairment [exclusion] rider may be attached to a contract for the purpose of eliminating coverage for a specifically defined pre-existing condition, such as back injuries.

Question 47

What is the guaranteed insurability rider?

Answer 47

The Guaranteed insurability rider is also referred to as future increase option or the guaranteed purchase option. It allows the insured to purchase additional amounts of disability income coverage without evidence of insurability.

Question 48

Rights of Renewability

Answer 48

The face page of the individual health insurance contract must clearly state under what conditions the policy may be renewed. If the insurer reserves the right to refuse renewal, the insurer must deliver or mail to the policyholders last known address a written notice of it intention not to renew the policy beyond the period for which the premium has been accepted.

The absence of a cancellation provision does not guarantee continuing protection.

Question 49

A guaranteed renewable disability policy is what?

Answer 49

Is renewable at the insured’s option to a specified age.

Question 50

Explain noncancelable policy.

Answer 50

The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies to the insured reaches age 65.