12.2 Optional Uniform Provisions
These provisions are optional and may be included at the discretion of the insurer. However, if they are used, they must comply with applicable state insurance laws. These provisions are primarily intended to protect the interests of the insurer.
Change of Occupation If the insured changes to a more hazardous occupation, benefits will be adjusted to the level that the current premium would have purchased for that higher-risk classification.
If the insured changes to a less hazardous occupation, benefits will continue as stated in the policy, and the insured may request a reduction in premium. If the insured is engaged in more than one occupation, the premium will be based on the most hazardous occupation.
Misstatement of Age If the insured’s age has been misstated, benefits will be adjusted to reflect the amount that the premium paid would have purchased at the correct age. If the misstatement results in coverage being issued beyond the insurer’s maximum age limit, the insurer’s liability is limited to a return of the premiums paid.
Other Insurance with This Insurer If an insured holds more than one policy with the same insurer, the insured may select which policy will be used for coverage. Any excess premiums paid for overlapping or duplicate coverage will be refunded. This provision is intended to prevent duplication of benefits and protect the insurer from overpayment of claims.
Insurance with Other Insurers If the insured has duplicate coverage with other insurers, each insurer’s liability is limited to a proportionate share of the loss. This process, known as coordination of benefits for individual policies, is calculated by determining each insurer’s share of the total coverage and applying that same proportion to the loss. Only policies issued on the insured are considered in this determination.
This provision applies to losses that are based on services rendered or expenses incurred.
Relationship of Earnings to Insurance Disability income (loss of time) benefits are limited so that they do not exceed the greater of the insured’s monthly earnings at the time the disability begins or the insured’s average monthly earnings during the two years immediately preceding the disability. However, benefits may not be reduced below a minimum monthly amount of $200.
Unpaid Premiums This provision permits the insurer to deduct any unpaid premium from the claim amount if a loss occurs during the grace period.
Conformity with State Statutes Any policy provision that conflicts with the laws of the state in which the policy is issued is automatically amended to comply with applicable state statutes as of the policy’s effective date.
Illegal Occupation/Act Coverage is excluded for losses resulting from injuries sustained while the insured is engaged in an illegal act or occupation. Additionally, individuals engaged in illegal occupations are generally ineligible for coverage, and their applications may be declined.
Intoxicants and Narcotics Coverage is excluded for injuries that occur while the insured is under the influence of alcohol or drugs. An exception applies when the substance is taken as prescribed and administered under the direction of a physician.
Cancellation The insurer may cancel the policy by providing written notice to the insured. If the insurer initiates the cancellation, any unearned premium must be refunded on a pro rata basis.
The insured may also cancel the policy at any time after the initial policy term by submitting written notice to the insurer. In this case, any unearned premium is returned on a short-rate basis, which may include a cancellation fee.
Quiz
1. If an insured changes to a more hazardous occupation, what happens to their benefits?
A. Benefits increase automatically
B. Benefits remain the same
C. Benefits are reduced to match the higher-risk classification
D. Policy is automatically canceled
Correct Answer: C
Rationale: Benefits are adjusted to the amount the current premium would purchase for the more hazardous occupation
2. What occurs if an insured’s age is misstated on the application?
A. Policy is voided immediately
B. Benefits are adjusted based on the correct age
C. No change is made to the policy
D. Premiums are doubled
Correct Answer: B
Rationale: Benefits are recalculated to reflect what the premium would have purchased at the correct age
3. When an insured has duplicate coverage with multiple insurers, how is the claim paid?
A. Each insurer pays the full claim
B. Only the primary insurer pays
C. The insured chooses one insurer
D. Each insurer pays a proportional share
Correct Answer: D
Rationale: Coordination of benefits requires each insurer to pay a proportionate share of the loss
4. Under the Relationship of Earnings to Insurance provision, disability benefits are limited based on what?
A. Policy face amount only
B. The insured’s age
C. The greater of current or prior earnings
D. State minimum wage
Correct Answer: C
Rationale: Benefits cannot exceed the greater of current earnings or the average earnings from the prior two years
5. If the insured cancels the policy, how is the unearned premium refunded?
A. Pro rata basis
B. Full refund with no fees
C. Short-rate basis with possible fee
D. No refund is provided
Correct Answer: C
Rationale: When the insured cancels, the unearned premium is returned on a short-rate basis which may include a cancellation fee