Chapter 9: Optional Provisions Flashcards
Optional provisions, also called __________, may be included at the option of the insurer
discretionary
Optional Provision 1: Change of Occupation - If the insured is injured or contracts sickness after having changed occupations to one classified as more hazardous than that stated in the policy, the insurer must pay ________ (long)
only the portion of the indemnities provided in the policy as the premium paid would have purchased at the rates and within the limits fixed by the insurer for such hazardous occupation.
Optional Provision 2: Misstatement of Age - What is it?
If the age of the insured has been misstated, all amounts payable under the policy will be modified to that which the premiums would have purchased at the correct age. A misstatement of age does not void the policy. The benefits are adjusted accordingly.
Optional Provision 3: Other Insurance with This Insurer - What is the purpose of this provision?
The purpose of this provision is to prevent the insured from making a profit by seeking medical care and filing claims. In these cases, the insured is unnecessarily over-insured.
Optional Provision 3 Notes:
Having coverage under more than one policy and/or more than one insurer is often confusing. The following sections and examples should help to clear up confusion on the various circumstances that are possible with individual policies.
NOTE: When the policies involve group coverage, the explanations are covered under the Coordination of Benefits (COB) sections in the Group and Senior chapters.
If an insured has accident or sickness policies with one insurer in which the total indemnity for certain type(s) of coverage exceeds the policy’s maximum, the excess insurance will be void and all premiums paid for such excess coverage will be returned to the insured or to the insured’s estate.
The purpose of this provision is to prevent the insured from making a profit by seeking medical care and filing claims. In these cases, the insured is unnecessarily over-insured.
Optional Provision 4: Insurance with other insurers - Expense Incurred
If the insured has other valid coverage providing benefits for the same loss on an expense-incurred basis and the insurer was not given written notice prior to the loss, each insurer is only liable for the ____ ____ of the loss, and the insurer will return the premiums on a pro rata basis.
proportionate share
TF: Optional Provision 4 - Insurance with other insurers - expense incurred protects insurer from “overinsurance”
True
Optional Provision 5: Insurance with Other Insurers - NOT Expense Incurred - What is this?
If the insured has other valid coverage providing benefits for the same loss on a basis other than expense-incurred and the insurer was not given written notice prior to the loss, each insurer is only liable for the proportionate share of the loss, and the insurer will return the premiums on a pro rata basis.
Optional Provision 6: Relation of Earnings to Insurance - Average Earnings Clause - The total monthly amount of loss of time benefits may not exceed the amount of monthly earnings of the insured at the time the disability began or the average amount of monthly earnings for the previous two years, whichever is greater. The average earnings clause may not reduce the total monthly amount of benefits payable to less than $200. This is meant to prevent ______, which is intentionally staying disabled in order to continue to receive disability income benefits
Malingering
Optional Provision 7 Unpaid Premium - Any premium due and unpaid may be _______ from the payment of a claim.
deducted
Optional Provision 8 Cancellation - The insurer may cancel the policy at any time by written notice delivered to the insured stating cancellation is not effective until at least _____ days later. After the policy has continued beyond its original term, the insured may cancel the policy at any time by written notice stating cancellation is effective ____ ____ or later.
Five
Upon Receipt
In the event of cancellation, the insurer must return the ______ (long)
unearned portion of any premiums paid
If the insured cancels, the earned premium is calculated on a ____-____ basis. If the insurer cancels, the earned premium will be computed ____ _____
Short Rate
Pro Rata
_____ _____ return of premium is used when the insurer cancels a policy and means the insurer’s earned premium is kept, and the unearned premium is returned to the insured.
Pro Rata
____ _____ return of premium is used when the insured cancels a policy and means the insurer is permitted to retain the earned premium and a portion of the unearned premium. The balance of unearned premium is returned to the insured.
Short-Rate