California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthHard
A health insurance policy in California includes a 'Change of Occupation' provision. If an insured changes to a more hazardous occupation and does not notify the insurer, and then files a claim, what is the most likely outcome under this provision?
- AThe insurer will pay the claim, but only after increasing the future premiums.
- BThe insurer will pay the claim in full, as long as the claim is unrelated to the occupation.
- CThe insurer will pay benefits that the premium paid would have purchased at the more hazardous occupation rate.
- DThe insurer will deny the claim entirely.
Show answer & explanationAnswer & explanation
Correct answer: C. The insurer will pay benefits that the premium paid would have purchased at the more hazardous occupation rate.
Under the 'Change of Occupation' provision, if an insured changes to a more hazardous occupation without notifying the insurer, the insurer will pay only the amount of benefits that the premium paid would have purchased at the rate for the more hazardous occupation. This means the benefits will be reduced proportionally.
Why the other options are wrong
- A. Increasing future premiums is a possible action, but for a claim occurring before notification, the immediate impact is on benefit reduction.
- B. The policy terms apply regardless of whether the claim is related to the occupation; the risk was increased by the change.
- D. Denying the claim entirely is generally too harsh for a change of occupation unless fraud is involved.
Change of Occupation Provision (A&H)
A standard provision in Accident and Health policies that addresses how benefits or premiums are adjusted if the insured changes to a more or less hazardous occupation.
- If more hazardous: Benefits reduced to what premium would buy at new rate.
- If less hazardous: Premiums reduced, or excess refunded.
- Insured should notify insurer promptly.
Memory trick: Changing your 'Occupation' to something 'Hazardous' means your 'Benefits' get 'Reduced' to fit the old 'Premium'.