Chapter 5: Health Insurance Policy Provisions
Learning Objectives
Understand:
- Grace periods by premium mode
- Claim procedures and timeframes (THE 20-15-90-60 RULE!)
- Reinstatement windows
- Elimination period vs. Probationary period
- Optional provisions
GRACE PERIODS: Critical Numbers!
Grace period = Time to pay late premium without losing coverage
This varies by HOW OFTEN you pay premiums:
| Premium Mode |
Grace Period |
| Weekly |
7 days |
| Monthly |
10 days |
| Quarterly |
31 days |
| Semi-Annual |
31 days |
| Annual |
31 days |
Memory Trick
More frequently you pay = shorter grace period
- Weekly (7) → Monthly (10) → Everything else (31)
What Happens During Grace Period?
- Coverage stays in force
- Customer can still file claims
- Benefits are still paid
- After grace period ends: Policy lapses (ends)
CLAIM PROCEDURES: THE 20-15-90-60 RULE ⭐
This is HUGE on the exam. Memorize this!
When a customer has a loss and needs to file a claim, here’s the timeline:
STEP 1: NOTICE OF CLAIM
Who: Customer must notify company
When: Within 20 days of the loss
Why: Company needs to know a claim is coming
Who: Company provides forms to customer
When: Within 15 days of receiving notice
Why: Customer needs forms to submit proof
STEP 3: PROOF OF LOSS
Who: Customer submits documentation
When: Within 90 days of the loss
Why: Company needs proof the loss happened
STEP 4: PAYMENT OF CLAIM
Who: Company pays the customer
When: Within 60 days of receiving proof (or “promptly”)
Why: Customer needs money to cover loss
Memory Trick for Timeframes
20-15-90-60: Notice → Forms → Proof → Payment
This is the most frequently tested timeframe sequence on the exam!
REINSTATEMENT: Getting Coverage Back
What it is:
- If a policy lapses (ends) due to non-payment, the customer can restart it
Time Window:
- Customer has 45 days after lapse to apply for reinstatement
- After 45 days, reinstatement right is lost
Requirements for Reinstatement:
- Customer applies to reinstate
- Company may require proof of insurability (good health)
- Customer typically must pay back premiums (with interest)
- Coverage restarts
Example Timeline:
- Premium due: January 1, 2024
- Grace period ends: February 10, 2024 (grace period varies)
- Policy lapses: February 11, 2024
- Last day to apply for reinstatement: March 27, 2024 (45 days later)
- After March 27: Can’t reinstate; must buy new policy
ELIMINATION PERIOD vs. PROBATIONARY PERIOD
These are often confused. Know the difference:
ELIMINATION PERIOD (Also called “Waiting Period”)
What it is:
- Time customer must WAIT after a loss before benefits start
- It’s a time deductible
- Applies to ALL types of losses
Examples:
- Disability insurance with 14-day elimination period
- Loss occurs Monday → Benefits start 14 days later
- During waiting period: No benefits paid
- After waiting period: Benefits begin
Cost Impact:
- Longer elimination period = LOWER premiums
- Shorter elimination period = HIGHER premiums
- Customer trades waiting time for lower cost
PROBATIONARY PERIOD (Also called “Waiting Period for Sickness”)
What it is:
- Waiting period for SICKNESS CLAIMS ONLY
- Does NOT apply to accidents
- Accident claims are covered immediately from day 1
Examples:
- Policy has 7-day probationary period
- Customer gets injured in accident on day 2 → COVERED (accidents don’t wait)
- Customer gets the flu on day 2 → NOT COVERED (sickness waits)
- Customer gets the flu on day 10 → COVERED (after probationary period)
Key Difference
| | Elimination Period | Probationary Period |
|—|——————-|——————-|
| Applies to | ALL losses | Sickness ONLY |
| Accidents | Have to wait | Covered immediately |
| Sickness | Have to wait | Have to wait |
| Purpose | Reduce claims cost | Prevent pre-existing condition claims |
LEGAL ACTIONS
When can customer sue the company?
- Customer cannot file a lawsuit until 90 days after submitting proof of loss
- This gives company time to investigate and decide
- After 90 days, customer can pursue legal action
OPTIONAL PROVISIONS (Company Can Choose to Add)
Note: These are optional. Company can offer them or not.
CHANGE OF OCCUPATION
What it means:
- If customer changes jobs, benefits might change
If change to MORE DANGEROUS job:
- Benefit amount might DECREASE
- Premium might INCREASE
If change to SAFER job:
- Benefits might stay the same
- Premium typically stays the same or decreases
Example:
- Customer insured as office worker
- Changes to construction worker (more dangerous)
- Company can reduce benefit amount
STACKED BENEFITS
What it means:
- Customer can collect benefits from multiple policies at once
- NOT double-dipping; limited to actual loss
Example:
- Customer has disability insurance from two companies
- Customer becomes disabled
- Can collect from both policies
- Total benefit = actual loss (not more)
KEY HEALTH INSURANCE TERMS
Grace Period
Time to pay late premium without losing coverage (varies by mode)
Elimination Period
Waiting time before benefits start after a loss
Probationary Period
Waiting period for sickness claims only (accidents covered immediately)
Reinstatement
Reactivating a lapsed policy (within 45 days)
Proof of Loss
Documentation showing the loss happened (due within 90 days)
Document customer fills out to request benefits
CHAPTER 5 QUIZ
Question 1
What is the grace period for a health insurance policy with MONTHLY premiums?
- A) 7 days
- B) 10 days
- C) 31 days
- D) 45 days
Show Answer
**Answer: B**
Monthly grace period = 10 days. (Weekly = 7 days; Everything else = 31 days)
Question 2
How long does the customer have to give NOTICE OF CLAIM?
- A) 10 days
- B) 20 days
- C) 30 days
- D) 60 days
Show Answer
**Answer: B**
Notice of Claim = within 20 days. Remember: 20-15-90-60!
Question 3
What is the “Elimination Period”?
- A) Time to file a claim
- B) Waiting time before benefits start after a loss
- C) Time to cancel the policy
- D) Grace period for premium payment
Show Answer
**Answer: B**
Elimination Period = time you wait after loss before benefits begin. It's a time deductible.
Question 4
What is the difference between “Elimination Period” and “Probationary Period”?
- A) They’re the same thing
- B) Probationary is for sickness claims only; Elimination applies to all losses
- C) Elimination applies only to accidents
- D) Probationary applies only when renewing
Show Answer
**Answer: B**
Probationary = sickness claims only. Elimination = all losses. Accidents are covered immediately (no probationary wait).
Question 5
How long does the customer have to submit PROOF OF LOSS?
- A) 20 days
- B) 45 days
- C) 90 days
- D) 120 days
Show Answer
**Answer: C**
Proof of Loss = within 90 days. Remember: 20-15-90-60!
CRITICAL NUMBERS (from Chapter 5)
Grace Periods:
- Weekly premiums: 7 days
- Monthly premiums: 10 days
- All other modes: 31 days
Claim Timeframes (THE 20-15-90-60 RULE):
- Notice of Claim: 20 days
- Claim Forms Provided: 15 days
- Proof of Loss: 90 days
- Payment: 60 days
Reinstatement:
- Must apply within: 45 days after lapse
Legal Action:
- Cannot sue until: 90 days after proof of loss
Summary
In this chapter you learned:
- Grace periods vary by premium mode (7, 10, or 31 days)
- The 20-15-90-60 claim timeframe rule (VERY IMPORTANT!)
- Elimination period = wait time before benefits
- Probationary period = sickness wait only (accidents covered immediately)
- Reinstatement window = 45 days
- Optional provisions include Change of Occupation and Stacked Benefits
Next: Chapter 6: Credit Insurance Basics