Other provisions I: insuring clause, free look, consideration, probationary and elimination periods

The other provisions

Beyond the mandatory and optional uniform provisions, every health policy contains clauses that set up the contract itself and control when benefits start. This lesson covers five:

• Insuring clause: what the insurer promises
• Free look: the buyer's right to return the policy
• Consideration clause: what the insured gives in exchange
• Probationary period: a one-time wait before sickness is covered
• Elimination period: a wait at the start of each disability before benefits are paid

Insuring clause

The insuring clause is the insurer's promise to pay. It is usually on the first page, and it states:

• who the parties are, the insurer and the insured
• what is covered, such as loss from accidental bodily injury or sickness
• that benefits are paid subject to the terms of the policy

Think of it as the heart of the contract. Every other provision either explains, limits, or adds to this promise.

Free look

The free-look provision gives the new policyowner a set period after delivery to review the policy. If they return it within that window, the policy is treated as if it had never been issued and they get a full refund of premium. They do not need to give a reason.

For individual health policies the window is commonly 10 days, and some states set it longer. The period starts when the policy is delivered, not when the application was signed.

Consideration clause

A contract needs something of value exchanged by both sides. In a health policy:

• the insurer's consideration is its promise to pay, stated in the insuring clause
• the insured's consideration is the completed application and **payment of the

initial premium**

The consideration clause also states the amount of premium and how often it is due, such as monthly or annually. A policy is not in force until the insured has given consideration, which is why the first premium usually has to be paid before coverage begins.

Probationary period

The probationary period is a waiting period right after the policy is issued, during which sickness is not covered. Accidents are generally covered right away.

• It applies once, at the start of the policy.
• Its purpose is to keep people from buying coverage for an illness they already feel coming

on.

• Illnesses that begin during the probationary period are not covered.

Elimination period

The elimination period is the number of days at the start of each disability during which no benefits are paid. It appears mainly in disability income policies.

• It works like a deductible measured in time instead of dollars.
• It applies to every new period of disability, not just once.
• A longer elimination period means a lower premium, because the insured absorbs more

of each short disability. Typical choices are 30, 60, 90 or 180 days.

Keep the two waits straight. The probationary period runs once from the policy's issue and keeps early sickness out. The elimination period runs from the start of each disability and delays the benefit check.