Question

An insured took out a disability income policy while working in a low hazardous occupation. When filing a claim for disability income benefits, the insurance company discovered the insured changed jobs 2 years prior to the loss. If the new job would have been classified as more hazardous, the insurance company will most likely:

A. Pay the benefit as contracted for since the policy is over 2 years old.
B. Reduce the benefit payment dollar for dollar to account for the premium underpayment.
C. Pay no benefit since the insured failed to inform the insurance company on a timely basis of the change in occupation.
D. Reduce the benefit to an amount the actual premium paid would have purchased under the proper job classification.

Answer 1

If an insured person changes to a more hazardous job and does not inform the insurer, the insurance company will likely adjust the disability income benefits to reflect the premium that should have been paid for the higher risk occupation.

Step-by-step explanation:

If an insured switched to a more hazardous occupation and failed to notify the insurance company, upon filing a claim for disability income benefits, the insurance company will most likely reduce the benefit to an amount the actual premium paid would have purchased under the proper job classification.

This means that if the new job would have been classified as more hazardous, the insurance company adjusts the benefits since the premium payments were based on a less hazardous occupation. It is essential for policyholders to inform their insurer of any significant changes in their occupation or lifestyle that could affect the risk profile the policy is based on.