Chapter 9: Optional Provisions Flashcards

1
Q

Optional provisions, also called __________, may be included at the option of the insurer

A

discretionary

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2
Q

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)

A

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.

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3
Q

Optional Provision 2: Misstatement of Age - What is it?

A

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.

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4
Q

Optional Provision 3: Other Insurance with This Insurer - What is the purpose of this provision?

A

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.

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5
Q

Optional Provision 3 Notes:

A

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.

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6
Q

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.

A

proportionate share

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7
Q

TF: Optional Provision 4 - Insurance with other insurers - expense incurred protects insurer from “overinsurance”

A

True

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8
Q

Optional Provision 5: Insurance with Other Insurers - NOT Expense Incurred - What is this?

A

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.

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9
Q

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

A

Malingering

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10
Q

Optional Provision 7 Unpaid Premium - Any premium due and unpaid may be _______ from the payment of a claim.

A

deducted

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11
Q

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.

A

Five
Upon Receipt

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12
Q

In the event of cancellation, the insurer must return the ______ (long)

A

unearned portion of any premiums paid

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13
Q

If the insured cancels, the earned premium is calculated on a ____-____ basis. If the insurer cancels, the earned premium will be computed ____ _____

A

Short Rate
Pro Rata

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14
Q

_____ _____ 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.

A

Pro Rata

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15
Q

____ _____ 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.

A

Short-Rate

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16
Q

Optional Provision 9: Conformity with State Statutes

A

Any provision of the policy in conflict with the statutes of the state or territory in which the insured resides will be amended to conform to the minimum requirements of such statutes. This provision assures that policies are always in alignment with the state laws.

17
Q

Optional Provision 10: Illegal Occupation

A

The insurer is not liable for any loss to which a contributing cause was the insured’s commission of or attempt to commit a felony or to which a contributing cause was the insured’s being engaged in an illegal occupation.

18
Q

Optional Provision 11: Intoxicants and Narcotics

A

The insurer is not liable for any loss or injury in consequence of the insured’s being intoxicated or under the influence of any narcotic, unless administered on the advice of a physician.

19
Q

Eric, an executive assistant, has a disability income policy with the change of occupation provision. Eric quits his office job and becomes a construction worker. What would happen to Eric’s policy if he becomes disabled after the job change?
Select one:
a. The insurance company would void the policy.
b. The insurance company would refund the premiums paid and void the policy.
c. The insurance company would pay the full amount of disability income benefits.
d. The insurance company would pay the amount of disability income benefits that the premium purchased would have covered for Eric’s more hazardous occupation.

A

D

20
Q

Marcy cancels her health insurance policy during the middle of the policy term. What will the insurer do?
Select one:
a. Return all of Marcy’s earned premiums on a pro rata basis
b. Return a portion of Marcy’s unearned premiums on a short rate basis
c. Return all of Marcy’s earned premiums on a short rate basis
d. Return a portion of Marcy’s unearned premiums on a pro rata basis

A

B

21
Q

Mary submits a claim for an injury that she incurred while under the influence of non-prescription narcotics. What will her insurer do?
Select one:
a. The insurer may void the policy.
b. The insurer may deny payment of the claim.
c. The insurer may adjust the insured’s benefits.
d. The insurer may increase the insured’s premiums.

A

B

22
Q

All of the following are optional provisions under the NAIC Uniform Provisions Law, EXCEPT:

Select one:
a. Change of occupation
b. Intoxicants and narcotics
c. Physical examination and autopsy
d. Misstatement of age

A

C

23
Q

The insurer discovers that Veronica misstated her age on the health insurance policy application. What will the insurer do?
Select one:
a. Void her policy
b. Adjust the policy benefits
c. Increase her premiums
d. Decrease her premiums

A

B

24
Q

Harold has a past due premium of $150 and a pending claim of $375. Which of the following is true?
Select one:
a. Harold’s claim will be denied because he has a past due premium.
b. Harold must pay the premium in order to receive policy benefits.
c. The insurer may deduct the amount of the past due premium from the claim.
d. The insurer may cancel Harold’s policy.

A

C

25
Q

What action will the insurer take if the insured has misstated their age on a health insurance application?
Select one:
a. Void the policy and not return any premiums
b. Cancel the policy and return any unearned premiums pro rata
c. Adjust the premiums
d. Adjust the benefits accordingly

A

D

26
Q

According to the cancelation provision for health insurance policies, the insurer has ____ days from the date written notice is delivered to the insured, to cancel a policy.
Select one:
a. 1
b. 5
c. 15
d. 31

A

B

27
Q

When periodic claim payments are required under a long-term disability income policy, an insurer must make payments to an insured at least once every:
Select one:
a. Month
b. Three months
c. Six months
d. Year

A

A

28
Q

All of the following are mandatory provisions for health and accident policies, EXCEPT:

Select one:
a. Claims form
b. Misstatement of age
c. Change of beneficiary
d. Entire contract and changes

A

B