Optional provisions

 

MR. WATSON: These are the optional provisions, so they might or might not be in the policy. It depends on the type of insurance we’re talking about, because these optional provisions don’t apply to every single type of health insurance contract. We will discuss each one, and you will need to know all the things we discuss for the exam.

1. Change of occupation: The company will adjust the benefits if the insured changes to a more hazardous occupation or reduce the premium if to a less hazardous job.
2. Misstatement of age: The company will adjust the benefits if the insured misstates their age. Even after two years.
3. Other insurance in this insurer
4. Insurance with other insurer
5. Insurance with other insurers
6. Relation of earnings to insurance
   
7. Unpaid premiums
8. Cancellation
9. Conformity with state statutes
10. Illegal Occupation
11. Intoxicants and Narcotics

Change of Occupation****

MR. WATSON: Change of occupation. Remember guys, your type of occupation can make a big difference in your premium rate, especially for disability insurance. Some jobs are more likely to result in a disability than others, right? Let me ask you this. Who's going to pay more for his health insurance? The guy in the circus with the bow and arrow, or the guy in the circus with the apple on his head? Which guy?

ALL: Apple on his head.

MR. WATSON: Guy with the apple on his head. So say you are the guy in the circus with a bow and arrow. You had a few bad nights, whacked the guy with the apple. They demote you, so now you are the guy with the apple on his head. If you don't notify the insurance company, and you take one in the eye, they're going to adjust the benefits down, because you changed to a more hazardous occupation. Does that make sense?

ALL: Yes.

MR. WATSON: On the other hand, what would happen if the insured changed to a less hazardous occupation? Because the premium would have been less, the company will pay the full benefit (the benefit he purchased) and return the excess premium. Look at this: Being a doctor is a safer job than being a farmer. The farmer is more likely to get hurt or disabled, right?  Disability Benefit of $3000 per month...Premium for a Doctor is $1000 per year and the premium for a farmer would be $1200 per year. Same benefit, different premium. Again, if he changed to a more hazardous occupation, they would reduce the benefit. If he changed to a less hazardous occupation they would pay the same benefit ($3000) but return the excess premium. See the chart below.

MR. WATSON: If the Doctor changed his occupation to a farmer, and did not inform the insurance company, should he suffer a disability, the company would only pay the benefit that they would have paid had they known he changed his occupation to a more hazardous one. This time, let’s say he starts out as a farmer and buys the policy, and then later becomes a doctor.  He was a smart farmer.  Since he changed to a less hazardous job, the insurance company will pay the full benefit ($3000) and refund the excess premium, because his premium should have gone down from the time he became a doctor.

 

OCCUPATION	PREMIUM	BENEFIT
Doctor	$1000	$5000
Farmer (Higher Risk) (less benefit)	$1000	$3000

Misstatement of Age or Sex

MR. WATSON: Misstatement of age or sex. The company will pay whatever they would have paid had the correct age and sex been known. The two year incontestable period does not apply to "how much" they will pay. Only to "if" they will pay. So if a guy has had a policy for one year and makes a claim, and during the claim the company realizes he lied about his age, what will we do?

MAN:  Deny it because it’s within the two years.

MR. WATSON:  Hellloooo!  Let’s try this again.  Age and sex are not material facts.  They don’t determine IF the company will pay a claim.

MAN:  Oh, right, so we adjust the benefit.

MR. WATSON:  Right.  And it doesn’t matter if you’ve had the policy for one year or ten years.  Be careful!

 

Other insurance with this insurer; Insurance with Other Insurer;

MR. WATSON: This is referring to an insured having more than one policy covering the same thing. If you have "other insurance with us" and you have insurance with another company, you will not get both, we reserve the right to adjust the premium and pay only our pro rata share. "To prevent over insurance."

 

Relation of Earnings to Insurance

MR. WATSON: Relation of earnings to insurance. You are a doctor in New York City and make a hundred thousand dollars. What kind of doctor are you? Not a good one, are you? You buy a disability policy with a benefit of $5,000 a month.

MR. WATSON: You are disabled, you get 60 percent of your salary. Got it?

MR. WATSON: Same Dr. but he moved down here to Wauchula, a small country town; and over the last two years, he has been making $50,000. Do you agree that in his desk drawer he has a disability policy that's going to pay him more than what he has been making?

ALL: Yes.

MR. WATSON: But will it?

ALL: No.

MR. WATSON: We reserve the right to adjust your benefit down to what you have been making over the last two years. In Florida, the benefit can not be reduced below $500 per month. Does that make sense?

ALL: Yes.

 

Unpaid Premiums

MR. WATSON: Unpaid premiums. If there is an unpaid premium at the time of a claim, the premium will be deducted from the benefit.

 

Cancellation

MR. WATSON: Cancellation. Guys, look, if you don't pay your premiums, they've got to give you ten days written notice before they cancel you. You remember the cancellable policy? I said you'd be an idiot to buy one. If you bought a cancellable policy that they could cancel at any time, they must give you 45 days notice before they cancel it. You have to know the 45 and the 10. Ten days if they just cancel it for nonpayment of premium. If you haven't paid your premium, they are going to cancel the policy. They have to give you ten days notice.