Change of Occupation, Misstatement of Age, Unpaid Premium & Illegal Occupation

Unlike the provisions previously discussed, the following provisions are not requiredto be in an individual health insurance policy, but, if they are, they must be in the words shown in the samples provided OR in alternative wording which is approved by the state insurance department AND which is not less favorable in any respect to the insured.

(Typical wording*):

“Change of Occupation: If the insured is injured or contracts sickness after having changed his occupation to one classified by the insurance company as more hazardous than that stated in this policy or while doing for compensation anything pertaining to an occupation so classified, the insurance company will pay only such portion of the indemnities provided in this policy as the premium paid would have purchased at the rates and within the limits fixed by the insurance company for the more hazardous occupation.

If the insured changes his occupation to one classified by the insurance company as less hazardous than that stated in the policy, the insurance company, upon receipt of proof of change of occupation, will reduce the premium rate accordingly, and will return the excess pro-rata unearned premium from the date of change of occupation or from the policy anniversary date immediately preceding receipts of proof, whichever is the more recent.

In applying this provision, the classification of occupational risk and the premium rates shall be such as have been last filed by the insurance company prior to the occurrence of the loss for which the insurance company is liable or prior to the date of proof of change of occupation with the state official having supervision of insurance in the state where the insured resided at the time this policy was issued; but if such filing was not required, then the classification of occupational risk and the premium rates shall be those last made effective by the insurance company in such state prior to the occurrence of the loss or prior to the date of proof of change in occupation.”

If the Change of Occupation provision is included in your individual health insurance policy, it should be worded like the above example or, if different, be worded in a way that is no less favorable to you than this wording. It essentially means that if you change your job to one more hazardous, and then you are injured, the insurer will only cover you at the rate your premium would have purchased for the more hazardous occupation. Thereafter, of course, your premium would increase. If you are covered while working in a hazardous occupation and then change to a less hazardous one, your premium would go down and you will get any overpayments returned.

If this type of provision appears in your policy, aside from your premium, your co-payments, deductible, co-insurance and out-of-pocket maximum might be affected. If the policy has no such provision, then a change of occupation of the insured will have no effect on premium or benefits.

*Wording may vary from contract to contract and from state to state.

Misstatement of Age Provision

(Typical wording*):

Misstatement of Age: If the age of the insured has been misstated, all amounts payable under this policy shall be such as the premium paid would have purchased at the correct age.

If age would have an effect on the amount or type of coverage provided, once the misstatement is disclosed, an appropriate adjustment in benefits will be made. This provision applies only in the absence of fraud or collusion. If fraud or collusion is present, the insurance company may treat the policy as void.

Unpaid Premium Provision

(Typical wording*):

Unpaid Premium: Upon the payment of a claim under this policy, any premium then due and unpaid or covered by any note or written order may be deducted therefrom.

This applies to any premium that is unpaid beyond the premium due date, even if it is still in the grace period.

Conformity with State Statutes Provision

(Typical wording*):

Conformity with State Statutes: Any provision of this policy which, on its effective date, is in conflict with the statutes of the state in which the insured resides on such date is hereby amended to conform to the minimum requirements of such statutes.

Your insurance policy must comply with the insurance laws of your state. Your state's insurance department must review it and approve it for sale. No reputable company would try to sell a policy that was not approved by the state insurance department. Nor, once approved, would it change the wording of the approved policy. An insurance company can lose its license to do business in that state for such practice.

The reality is, however, that insurance department review and approval is done by human beings and errors, oversights and misjudgments do occur. When they do crop up, and a policy is issued with a provision that does not conform to state law, the above provision assures all parties that state law will prevail. In fact, state law will prevail even without this provision in the policy. But the provision gives all parties to the contract a sense of assurance that the policy is legitimate.

Illegal Occupation Provision

(Typical wording*):

Illegal Occupation: The insurer shall not be liable for any loss to which a contributing cause was the insured’s commission of or attempt to commit a felony or to which a contributing cause was the insured’s being engaged in an illegal occupation.

If an insured is injured in committing a felony, or attempting to commit a felony, many courts will allow the insurance company to deny benefits either because: a) Committing a felony is generally not looked on as an accident, or b) Allowing payment would violate public policy (i.e., no benefits should be payable when the injury is caused by criminal wrongdoing.)

Many courts will deny benefits even without this provision in the policy, but having it there makes it easier for a court to support a denial of benefits.

In order to successfully rely on this provision, there must be a connection between the criminal act and the injury. It is interesting to note that most courts say that the Illegal Occupation provision applies when injury is caused by the insured feloniously driving while intoxicated. But in some states, driving while intoxicated is not a felony. In those states the policy provision does not apply.

Related articles:

Overview

Time Limit on Certain Defenses Provision or the Incontestable Provision

Renewal and Reinstatement Provisions in a Health Insurance Policy

Notice of Claim and Claim Forms Provisions

Proof of Loss and Time for Payment of Claims Provisions