United States
Hong KongThe optional provisions, and the other clauses
Mandatory provisions must appear and generally protect the insured. Optional provisions appear only if the insurer includes them and generally protect the insurer, covering things like illegal occupation and other insurance with the same company. Heading B adds fifteen further clauses, including the cost-sharing terms.
The outline puts mandatory and optional provisions in one heading and does not label which of its sixteen items belongs in which group. That is worth knowing before you go looking for a tidy division, because the distinction still matters and you have to supply it yourself.
Mandatory against optional
| Mandatory | Optional | |
|---|---|---|
| Must appear in the policy | Yes | No, the insurer chooses |
| Whose interest they mostly serve | The insured | The insurer |
| May the wording differ | Only if at least as favorable to the insured | Within the limits the law allows |
| Examples | Entire contract, grace period, notice of claim, proof of loss | Illegal occupation, other insurance with this insurer, relation of earnings |
One line covers the whole distinction. A mandatory provision may be reworded only in the insured's favor; an optional one may be left out altogether. So if a stem asks whether a policy must contain something, ask whose side the provision is on.
The optional provisions worth recognizing
- Illegal occupation: no benefit for a loss arising from committing a felony or from an illegal occupation.
- Other insurance with this insurer: limits total coverage the same company will pay across several of its own policies.
- Insurance with other insurers: apportions an expense benefit where the insured holds coverage elsewhere that was not disclosed.
- Relation of earnings to insurance: reduces a disability benefit where the insured's income has fallen.
- Change of occupation: adjusts the benefit to the rate for the new occupation.
- Misstatement of age: adjusts the benefit to what the premium would have bought at the true age.
Notice how many of them adjust rather than deny. That is the pattern across this entire section and it is the single most reliable way to eliminate a wrong answer: an insurance provision that voids a policy is rare, and one that recalculates a benefit is everywhere.
Heading B: the other clauses
The outline's second heading in section VI lists fifteen more items, and it is a mixed bag by design. Some are contract mechanics you have already met on the life side. Some are the cost-sharing terms that decide what a member actually pays. Some are limits on what the policy covers at all.
| Group | Clauses |
|---|---|
| Contract mechanics | Insuring clause, free look, consideration clause |
| Waiting before benefits | Probationary period, elimination period |
| Premium relief | Waiver of premium |
| What is not covered | Exclusions and limitations, preexisting conditions |
| What the member pays | Coinsurance, deductibles, copayments, eligible expenses |
| Controls on cost | Pre-authorization and prior approval, usual, reasonable and customary charges |
| Caps | Lifetime, annual or per cause maximum benefit limits |
Three of those groups have their own pages in this cluster, because they carry the confusable pairs: probationary against elimination period, the three cost-sharing terms, and preexisting conditions. Those three are where the questions from heading B come from.
A policy contains no illegal occupation provision. The insured is injured while committing a burglary. What is the position on the claim?
- The claim is denied, because illegal acts are never covered
- The provision is optional, so its absence means there is no exclusion on that ground
- The claim is denied, because the provision is implied into every policy
- The insurer may add the provision retroactively
Where it sits
- Section
- VI, provisions, clauses and riders, 15 questions
- Heading A
- Mandatory and optional provisions, sixteen items
- Heading B
- Other provisions and clauses, fifteen items
- Between them
- Thirty-one items in a section worth 15 questions
Thirty-one listed items and 15 questions means most items carry no question on any given form. That is a reason to work on the confusable pairs rather than to attempt uniform coverage, and it is the clearest case on the paper for studying by trap rather than by list.
The opinion, and the concession
The mandatory and optional distinction is worth ten minutes and no more, because it produces at most one question and the rule is a single sentence. What deserves the hour is the cost-sharing terms and the two waiting periods, which is where a candidate who has read everything can still lose three or four marks.
The concession: the outline does not tell you which of its sixteen items are mandatory and which optional, and different study materials draw the line in slightly different places because state adoptions of the model law vary. We have set out the ones that are uncontroversially optional. If your course splits them differently, check whether it is describing Texas or describing the model.
Common questions
What is the difference between mandatory and optional provisions?
Mandatory provisions must appear in the policy and generally protect the insured, and may only be reworded in the insured's favor. Optional provisions appear only if the insurer chooses to include them and generally protect the insurer. Absence of an optional provision means the protection does not apply.
What does the illegal occupation provision do?
It removes cover for a loss arising from the insured's commission of a felony or from an illegal occupation. It is optional, so a policy that does not contain it has no exclusion on that ground, which is a favorite way of testing whether candidates know what optional means.
Which clauses decide what the member pays?
Coinsurance, deductibles, copayments and the definition of eligible expenses, all listed in heading B of section VI, along with usual, reasonable and customary charges and any maximum benefit limits. Between them they determine the member's share of every claim.
How many items does section VI list in total?
Thirty-one across its two main headings, sixteen mandatory and optional provisions plus fifteen other clauses, in a section worth 15 questions. Most listed items therefore carry no question on a given form, which argues for studying the confusable pairs rather than the full list evenly.