Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Health InsuranceHard
A Florida resident is covered by an individual disability income policy. The policy includes a 'Change of Occupation' provision. After several years, the insured changes from a low-risk office job to a high-risk construction job without notifying the insurer. If the insured becomes disabled due to an injury sustained on the construction job, what is the most likely outcome regarding their disability benefits?
- ABenefits will be denied completely due to non-disclosure.
- BBenefits will be reduced to what the premium would have purchased at the new, higher-risk occupation.
- CThe insurer will increase the premiums retroactively to reflect the higher risk.
- DBenefits will be paid at the original amount, as the policy was already in force.
Show answer & explanationAnswer & explanation
Correct answer: B. Benefits will be reduced to what the premium would have purchased at the new, higher-risk occupation.
Under the 'Change of Occupation' provision, if an insured changes to a more hazardous occupation and does not notify the insurer, benefits will be reduced to what the premium would have purchased at the higher-risk classification. This prevents the insured from paying a lower premium for a higher risk.
Why the other options are wrong
- A. Complete denial is unlikely unless there was outright fraud; reduction of benefits is the standard outcome for this provision.
- C. Retroactively increasing premiums is not the typical action; benefit reduction is the common remedy for unnotified changes to more hazardous occupations.
- D. Paying at the original amount would be unfair to the insurer, as the risk has increased without a corresponding premium adjustment.
Change of Occupation Provision
A disability income policy provision that adjusts benefits if the insured changes to an occupation with a different risk classification.
- Protects insurer from increased risk without premium adjustment.
- If occupation is more hazardous, benefits are reduced.
- If occupation is less hazardous, premiums may be reduced or benefits increased (with notice).
Memory trick: Disability policies have clauses to handle life's changes, especially job risk.