Mandatory provisions III: physical exam, legal actions…

Finishing the mandatory provisions

Individual health (accident and sickness) policies carry a standard set of mandatory uniform provisions: wording every policy must contain, so that a buyer gets the same basic protections whichever insurer wrote it. Earlier lessons covered the first nine, from entire contract through payment of claims. This lesson finishes the list with the last three:

Physical examination and autopsy
Legal actions
Change of beneficiary

It then turns to two optional provisions that adjust benefits rather than void the policy: change of occupation and misstatement of age. Optional means the insurer may include them. If it does, it must use the standard wording.

A diagram in three bands. The top band, labelled mandatory, has three cards. The first, physical exam and autopsy, says the insurer may examine the insured at its own expense, as often as reasonably required while a claim is pending, and may perform an autopsy at death where the law does not forbid it. The second, legal actions, says no suit may be brought until sixty days after proof of loss is furnished, and none after three years from when proof was required, which is the standard model wording. The third, change of beneficiary, says the right to change belongs to the insured and the beneficiary's consent is not required unless the designation is irrevocable. The middle band is a timeline of the legal actions window. It starts at the loss, then proof of loss furnished, then a grey stretch marked no suit yet. At sixty days a green stretch begins, marked suit may be filed. It runs until three years after proof was required, where a red stretch marked barred begins. The bottom band, labelled optional, says benefits are adjusted and the policy is not voided. A change of occupation card is split in two. On the left, a more hazardous job means the benefit is reduced to what the premium paid buys at the riskier rate, so the claim is paid but smaller. On the right, a less hazardous job means the premium rate is reduced and excess unearned premium is refunded on proof, from the change or the last anniversary, whichever is later. A misstatement of age card says benefits are adjusted to what the premium paid would buy at the correct age, and the policy stays in force. — The last three mandatory provisions, the legal actions window, and the optional occupation and age adjustments.

Physical examination and autopsy

While a claim is pending, the insurer has the right to have the insured examined:

at the insurer's own expense
as often as it may reasonably require
and, if the insured dies, to perform an autopsy where it is not forbidden by law.

The purpose is to let the insurer verify a claim, for example that a disability is still continuing. The right applies during a claim. It is not a right to re-underwrite a healthy insured, and the insured never pays for the exam.

Legal actions

This provision sets a window for suing the insurer over a claim.

Earliest: no lawsuit may be brought until **60 days after written proof of loss has

been furnished**. This gives the insurer time to investigate and pay.

Latest: no lawsuit may be brought more than **3 years after the time written proof of

loss was required** to be furnished. This is the standard model wording, and some states set a longer period.

Watch the starting points. The 60 days run from when proof was furnished. The 3 years run from when proof was required, which comes from the proof-of-loss provision.

Change of beneficiary

Beneficiaries matter in health policies mainly for death benefits, such as accidental death. Most other benefits are paid to the insured.

The right to change the beneficiary belongs to the insured.
The beneficiary's consent is not required to change the beneficiary, to surrender or

assign the policy, or to make any other change.

The exception is an irrevocable beneficiary designation. An irrevocable beneficiary has

a vested interest, and the insured needs that person's consent to change it.

Change of occupation (optional)

Occupation matters most in disability income and accident coverage, where riskier work means a higher premium. The provision compares the insured's new job with the one the policy was priced on:

More hazardous occupation: the insurer pays only the benefit that the premium paid

would have bought at the rate for the riskier occupation. The policy is not voided and the claim is not denied. It is reduced.

Less hazardous occupation: once the insurer receives proof of the change, it

reduces the premium rate and refunds the excess unearned premium. The refund runs from the date of the change or the last policy anniversary, whichever is later.

Misstatement of age (optional)

If the insured's age was misstated, benefits are adjusted to what the premium paid would have bought at the correct age. Like the occupation provision, it corrects the amount instead of voiding coverage.

Don't confuse these with exclusions

Two other optional provisions sound similar but work very differently. Illegal occupation lets the insurer deny a loss when committing a felony or working in an illegal occupation contributed to it. Intoxicants and narcotics lets it deny a loss sustained while the insured was intoxicated or under the influence of a narcotic, unless a physician prescribed it. These provisions deny a claim. Change of occupation and misstatement of age only adjust it.

Mandatory provisions III: physical exam, legal actions, and beneficiary/occupation changes