COMMENT: This entire contract provision grew out of abuses by some insurance companies that incorporated by reference into their policies provisions from other documents. Insureds had little means of learning about the incorporated documents and were sometimes harmed by them. The entire contract provision guarantees to the insured that the Policy and the documents attached to the Policy (riders, endorsements and the application) make up the entire contract and that there are no hidden documents that affect the insurance contract.

Another important purpose of the entire contract provision is to ensure that you, the insured, receive a copy of the policy application. If you discover that information contained in the policy application is incorrect, you may then contact the insurer. Moreover it forecloses an argument that could be made by the insured that he/she had no knowledge of the application misstatements.

These days insurers almost always attach a copy of the application to the policy. More importantly insurance companies cannot ordinarily use the misstatements in the application to rescind coverage if the application is not attached.

COMMENT: The purpose of this provision is to make clear that the only kind of assignment that the insurance company will recognize is one where the insured, after medical expenses are incurred, assigns the insurance benefits due the insured for those expenses to the doctor, hospital or other service provider for the services provided. Assignment of benefits in this way is a very common practice as a way to provide for direct payment by the insurance company to the service provider and save the insured that extra step.

Another life insurance policy cash values and/or death benefits can be assigned in advance of a claim being incurred. Most health and long term care insurance policies will only allow for assignment of benefits after expenses have been incurred for the sole purpose of paying service providers.

COMMENT: This provision is designed, as its title suggests, to facilitate the proper and expeditious payment of small amounts of final Benefits due or premium refund due at your death when it might otherwise be difficult for the insurance company to sort out exactly who has the ultimate priority claim to the payment.

For example, if you, the insured, paid an annual premium on your policy and then died 4 months later, ordinarily your estate would be entitled to the return of the unearned premium for the remaining 8 months. But, if there are complications with the estate that have the potential to last for many years, requiring the insurance company to hold the money for all that time, this provision allows the company to get the money off its books (if it is $1,000 or less) by paying it to anyone related to you by blood or marriage whom the insurance company deems entitled to payment. The insurance company does not have to wait for the probate court to sort things out regarding the estate.

COMMENT: This is an important provision. It is giving you, the insured, advance warning in writing that the only valid changes to your insurance contract must be signed by the company President, Secretary or a Vice President. In other words, whatever may be promised to you by a sales representative, even if it is in writing under the letterhead of the insurance company, is not a valid change in your contract – and the insurance company wants you to legally agree to that understanding by making it a part of your insurance contract.

This provision is designed to stop the argument that you believed your agent, acting for the company, had authority to make the contract change and you relied on that to your detriment – and now you want to blame the company. This contract provision makes it clear to you that the agent does not have such authority regardless of how it may look to you.

COMMENT: Statements you make on your application are regarded as representations, not warranties. A warranty is a statement guaranteed to be true in all respects. If a warranted statement is untrue in even a trivial respect, it can provide sufficient grounds for the insurance company to void the contract.

For example, an incorrect statement as to your age on the application, if regarded as a warranty, would be grounds for the insurance company to void your contract. But since it is regarded as a representation, the insurance company must show that it was material to the risk it assumed before it can consider voiding your contract of insurance. Rarely can the insurance company show that misstatement of age as material to the risk.

Unlike warranties, if you make a false statement of fact on your policy, that is considered a misrepresentation. Then the next question is whether that false representation is material to the insurer's risk. A material fact is one that, if known to the insurance company at the time of application, would have caused it to refuse to enter into the insurance contract on the terms in which it did so. This means that, if it had known the true facts, the insurance company would have denied the application, issued the insurance policy at a higher premium, waited for a period of time to see if the condition improved, excluded certain risks or taken some action other than acceptance of the application and issuance of the coverage.

Misrepresentations usually relate to medical history. However, other misrepresentations can be material. For example, misrepresentations of non-smoking status, participation in hazardous activities, work status, income, drug use, and other insurance in force have all been found by the courts to be material.

This policy provides for three types of misrepresentation, based on time period:

1. If the policy has been in force for less than 6 months, the insurance company can void your policy if your misrepresentation is material.
2. If your policy has been in force between 6 months and 2 years, it can void your policy if your misrepresentation is material AND the misrepresentation pertains to the condition for which Benefits are sought. For example, you do not tell the insurer that you have a history of strokes, then you have a stroke that so incapacitates you that you cannot perform the normal Activities of Daily Living.
3. If the policy has been issued for 2 years or more, the insurer can only void the policy if it can prove fraud – that you knowingly and intentionally misrepresented relevant facts about your health.

In the first two instances, you may have knowingly and intentionally misrepresented relevant facts, but the insurance company does not have to prove that you intended to do this. Not surprisingly, intent to deceive (fraud) is very difficult to prove. But the possibility for success does exist.

COMMENT: Your may cancel your policy at any time, but your notice will only be effective if it is done in writing. Cancellations occur at month end, under the following circumstances:

1. If you cancel immediately without specifying a date, your policy will be cancelled on the last day of the Policy Month in which your request is received by the insurance company.
2. If you specify a future date to cancel, the cancellation is effective on the last day of the Policy Month of your request.
3. If you request a date that has already passed, the cancellation will be effective as of the last day of the Policy Month in which your written notice is received by the insurance company.

If you have a claim in progress when you request cancellation, it will be processed because the policy was not cancelled until after the claim was incurred. Once you are eligible for Benefits, no further premiums are due until you are not longer eligible for Benefits. The policy cannot be cancelled retroactively, that is with an effective date prior to the date of receipt of the written notice by the insurance company.

COMMENT: Your health cannot cause your policy to terminate. There are only 4 ways your policy can terminate:

1. You request cancellation.
2. You reach the Total Lifetime Benefit under the policy. Not all long term care policies have a Total Lifetime Benefit limitation. If you are willing to pay a higher premium, you can buy a policy without a Total Lifetime Benefit, in which case you are only subject to Maximum Daily Benefit Amount limits. They do not terminate your policy.
3. You stop paying the premium and the policy Lapses.
4. Death

If you have purchased a rider that provides nonforfeiture benefits, your policy may remain in effect for some specified period of time after the normal termination date based on the terms of the rider. Such a rider would typically provide you with the option to use the nonforfeiture values (cash values) that have accumulated in the rider to pay premium to continue the policy in force with the same benefits for a short period of time or continue it in force for a longer period of time with reduced benefits.