The Insurance Contract pt 2 (p25-35)

Question 1

The entire contract consists of…

Answer 1

The policy, the application, and the amendments

Question 2

Who can change a contract? Who cannot?

Answer 2

Only a company official such as the president or vice president. *Agents cannot change any contract of the insurance** Changes must be in writing and require a signature of the company official and policy owner.

Question 3

The Insuring Clause

Answer 3

The insurer’s promise to pay. Generally, this provision appears on the cover page of the policy.

Question 4

Free Look

Answer 4

AKA the right to examine. Provides the policyowner with the right to review the policy. If, for any reason, the policyowner is not satisfied with the policy, it may be returned to the insurer within 10 days of delivery, for a full premium refund. It can be more than 10 days but not less.

Question 5

Consideration Provision

Answer 5

Primarily refers to the amount and frequency of premium payments. The more frequent the payment, the higher the total premium.

Question 6

Premium Payment Clause

Answer 6

All premiums are payable in advance to the insurance company (except for the first payment).

Question 7

Incontestable Clause (time limit on certain defenses)

Answer 7

The insurer may not contest dispute or deny a claim based on information contained in the application after the policy has been in force for two years. THIS INCLUDES FRAUD after 2 years- incontestable.

Question 8

Misstatement of Age or Sex

Answer 8

This is an exception to the 2 year contestable period that allows insurer to make changes in the policy at any time it discovers an error due to age or sex. These are administrative errors and not grounds to cancel the policy. (adjust premium)

Question 9

Grace Period

Answer 9

The period of time the policyowner has to pay the premium. The grace period for ordinary life policies is one month(not 30 or 31 days)

Question 10

Reinstatement Clause

Answer 10

Generally, the conditions are 1) all back premiums plus interest must be paid 2) Any outstanding policy loan must be paid 3) a reinstatement application may be required 4) proof of insurability is required **In Michigan, reinstatement can be made up to 3 years after the policy has lapsed

Question 11

Ownership Clause

Answer 11

There can be 3 persons involved with the policy (policyowner, the insured, and the beneficiary). Most often, the policy owner and the insured are the same person. In credit insurance, the creditor is the owner*****

Question 12

Rights of the owner

Answer 12

The right to name and change a beneficiary. The right to elect a cash value loan. The right to assign the policy. The right to elect a settlement option or a dividend option.

Question 13

Grace period for various premium modes:

Answer 13

Weekly premiums- 7 days. Monthly premiums- 10 days. Annual and all other premiums- 31 days.

Question 14

Reinstatement application requires what? How long does the insurer have to act on it once all requirements are met?

Answer 14

Proof of insurability, all premiums plus interest paid back. *the insurer then has 45 days to act on the request for reinstatement

Question 15

Probationary Period/Waiting Period (health policies)

Answer 15

A reinstated health policy contains a 10 day probationary period

Question 16

Notice of Claim

Answer 16

The insured has 20 days to notify the insurer of a claim or whatever period of time is reasonable.

Question 17

Claim Forms

Answer 17

Once notified, the insurer has 15 days to provide the insured with claims forms. If they fail to do so, the insured is free to use any form for purposes of reporting the claim.

Question 18

Proof of loss

Answer 18

The insured has 90 days from the date of loss to complete the claims forms, attach supporting info (like medical bills) and submit the claim.

Question 19

Time payment of claim

Answer 19

Once the claim is received, the insurer must pay promptly. In most states, this means within 60 days. They must make every effort to settle the claim as quickly as possible.

Question 20

Legal action-time frame

Answer 20

60 days- 3 years after the time of written proof of loss.

Question 21

Insurance with other insurers

Answer 21

In the event of duplicate coverage with more than one company, this provision provides for a pro rata reduction of medical expense benefits and a return of premium. (same for individual disability income policies) ***This does NOT apply to group health insurance coverage

Question 22

Elimination Period

Answer 22

A time deductible