Health Insurance Policy Provisions

The NAIC Uniform Provisions Framework

The NAIC's Required Uniform Individual Accident & Sickness Policy Provisions Law — adopted in nearly every state — standardizes individual health contracts into 12 mandatory and 11 optional provisions, all in standard language. An insurer may substitute its own wording only with state approval, and never with language less favorable to the insured. Mandatory provisions must appear in every individually underwritten contract and exist for the insured's benefit; optional provisions protect the insurer by defining (and thereby limiting) its rights.

Mandatory Provisions I — The Contract Itself

The entire contract clause says the deal is the policy form + application + attachments — WYSIWYG, with changes only by an executive officer with your written consent. The time limit on certain defenses makes the policy incontestable after 3 years (2 in most states) — except for fraud, which is contestable forever. The grace period runs 7 days (weekly premium), 10 (monthly), 31 (everything else). Reinstatement is automatic when the insurer accepts the late premium without requiring an application — or after 45 days of silence on a required application — and covers accidents immediately but sickness only after a 10-day probation. The physical exam & autopsy provision lets the insurer verify claims at its own expense, and the change of beneficiary provision keeps a revocable designation in the owner's control.

Mandatory Provisions II — The Claims Clock

A claim moves on fixed deadlines. Notice of claim: insured tells the company within 20 days (long disability claims: re-prove every 6 months). Claim forms: insurer sends paperwork within 15 days or must accept proof in any form. Proof of loss: filed within 90 days (up to 1 year if legally incapacitated). Time payment of claims: pay immediately — disability income at least monthly. Payment of claims: benefits to the insured or provider; death benefits to the beneficiary, the estate if none, or a blood/marriage relative if the beneficiary is a minor. Legal actions: no lawsuit sooner than 60 days after proof of loss nor later than 3 years.

The 11 Optional Provisions

All eleven protect the insurer. Change of occupation rebalances the deal (riskier job → benefit cut; safer job → premium cut); misstatement of age adjusts the benefit to what the premium buys at the true age. Three clauses attack over-insurance: other insurance with this insurer (one policy pays, duplicate refunded), insurance with other insurer(s) (different companies prorate), and the relation of earnings clause (disability benefits can't beat lost income). Unpaid premiums come out of grace-period claim checks; the cancellation provision (5-day notice) is banned in most states; conformity with state statutes auto-corrects the contract to state minimums; and illegal occupation plus intoxicants & narcotics deny claims born of felonies or non-prescribed impairment. (Counting check: the two "insurance with other insurer(s)" clauses — expense-incurred vs other-than-expense-incurred — are two separate provisions of the eleven, combined into one entry here.)

Necessary (But Unregulated) Provisions

Three clauses appear in every policy even though their wording isn't dictated. The free look (right to examine) gives 10 days from delivery to return the policy for a full refund — 30 days for direct-mail policies and Medicare supplements — with notice on the face page (delivered Jan 27? Count from Jan 28; the window closes Feb 6). The insuring clause is the insurer's promise: what's covered, when it pays, and the coverage term. The consideration clause defines your side of the exchange: the premium plus the statements on the application.

Renewability — Who Can Walk Away?

Ranked from most to least favorable to the insured (premium cost falls as protection falls): noncancelable — the double guarantee, no termination AND no premium increase; guaranteed renewable — renewal locked but premiums can rise by class (used by disability income, LTC, and Medicare supplements); conditionally renewable — terminable only for stated conditions like age or job loss, never health; optionally renewable — the company decides at each renewal date; nonrenewable and period-of-time policies — temporary coverage that simply expires; and cancelable — either party may terminate anytime with notice and a refund of unearned premium. Whatever the class, the insured can always cancel in writing, and any policy dies if the premium isn't paid by the end of the grace period.

Exclusions, Pre-Existing Conditions & Waiting Periods

Standard exclusions strip out war, self-inflicted injuries, pilot/crew aviation, military service, extended foreign travel, suicide and drug use, riots and felonies, workers'-comp losses, cosmetic/experimental surgery, routine vision and dental, and anything not medically necessary — though accident-caused cosmetic, vision, or dental work IS covered. The pre-existing condition provision excludes conditions predating the effective date (even unknown ones), guarding against adverse selection; a disclosed condition lets the insurer deny, rate up, exclude permanently, or cover it — with waiting periods generally capped at 12 months. A severe condition may instead draw an impairment (exclusion) rider carving that one impairment out of coverage — explained and signed for at delivery. Finally, the probationary period (10 days common, 30 max) delays sickness coverage once at inception — accidents are covered from minute one.

COB, Assignment, Indemnity Helpers & Beneficiaries

Coordination of benefits keeps multi-plan families honest: primary pays first, secondary tops up, recovery never exceeds actual expenses — spouses' own plans are primary, kids follow the birthday rule, and Medicare is secondary for active workers at 20+ employee firms but primary for retirees, individual policies, and sub-20 groups. The owner's rights/assignment provision lets you route benefit checks straight to providers — but health policy ownership itself can't be transferred. No loss/no gain statutes, subrogation (the insurer pays you, then chases the at-fault third party), and COB all enforce the principle of indemnity. Restoration of benefits refills the tank after claims; the military suspense provision pauses (not cancels) coverage during active duty; premium modes run monthly-to-annual (annual cheapest — no single-premium health policies); and a waiver of premium kicks in after prolonged total disability. When a death benefit exists, proceeds cascade primary → contingent → tertiary beneficiary, bypassing probate; under the Uniform Simultaneous Death Act the insured is presumed to die last, and the common disaster provision makes the primary outlive the insured by 14–30 days to collect.