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Optional Provisions

Change of occupation, relation of earnings to insurance, misstatement of age, illegal occupation, intoxicants, and the other optional provisions.

Study questions and answers

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1. If an insured changes to a more hazardous occupation, under the change of occupation provision:

  1. The policy is canceled
  2. Benefits are reduced to what the premium would buy at the new occupation's rate
  3. The premium is raised retroactively
  4. Nothing changes
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B. Benefits are reduced to what the premium would buy at the new occupation's rate
If the insured moves to a less hazardous occupation, the insurer refunds the excess premium instead.

2. The relation of earnings to insurance provision applies to which type of coverage?

  1. Disability income
  2. Medical expense
  3. Dental
  4. Long-term care
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A. Disability income
It prevents an insured from collecting more in disability benefits than they earned, which removes the incentive to stay disabled.

3. Which optional provision allows the insurer to deny a claim for a loss that resulted from the insured committing a felony?

  1. Intoxicants and narcotics
  2. Change of occupation
  3. Unpaid premium
  4. Illegal occupation
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D. Illegal occupation
The insurer is not liable for losses resulting from the insured's commission of, or attempt to commit, a felony or participation in an illegal occupation.

4. Under the unpaid premium provision, when a claim is paid:

  1. The claim is denied until the premium is paid
  2. The policy lapses
  3. Any premium due and unpaid may be deducted from the claim payment
  4. The insurer adds interest to the claim
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C. Any premium due and unpaid may be deducted from the claim payment
The insurer can simply subtract the unpaid premium from the benefit it pays.

5. Under the conformity with state statutes provision, any policy provision that conflicts with state law is:

  1. Enforced as written
  2. Automatically amended to meet the minimum requirements of the law
  3. Decided by the agent
  4. Void, which voids the entire policy
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B. Automatically amended to meet the minimum requirements of the law
This protects insureds if a policy is issued with an out-of-date provision.

6. Under the misstatement of age provision in a health policy, if the insured's age was misstated:

  1. The claim is denied
  2. The policy is voided
  3. The insurer refunds all premiums
  4. Benefits are adjusted to what the premium would have purchased at the correct age
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D. Benefits are adjusted to what the premium would have purchased at the correct age
This works the same way as the misstatement of age provision in life insurance.

7. Under the intoxicants and narcotics provision, the insurer is not liable for a loss sustained while the insured is:

  1. Intoxicated or under the influence of a narcotic not taken on a physician's advice
  2. Taking any prescribed medication
  3. Working a second job
  4. Traveling outside the country
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A. Intoxicated or under the influence of a narcotic not taken on a physician's advice
Narcotics taken as prescribed by a doctor do not trigger the exclusion.
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