United States
Hong KongTime of payment of claims, and payment of claims
Time of payment of claims sets how quickly the insurer must pay once it has proof of loss, with periodic payments for continuing losses such as disability. Payment of claims sets who receives the money: the insured, an assignee, a named beneficiary on death, or in some cases a relative.
Two provisions, almost the same name, and they answer different questions. One is about speed. The other is about the payee. Read the stem for whether it is asking when or who, and the choice makes itself.
Time of payment of claims
Once proof of loss has been received, the insurer must pay within the period the policy states. For a continuing loss such as a disability, benefits are paid periodically as the policy provides rather than held until the disability ends, with the balance payable when proof of the whole loss arrives.
The periodic payment part is the examinable half. A claimant who cannot work is not asked to wait until they recover to be paid, which would defeat the purpose of the coverage.
Payment of claims
| Benefit | Paid to |
|---|---|
| Disability or expense benefits | The insured |
| Benefits assigned | The assignee, where the policy permits assignment |
| Death benefit under a health policy | The named beneficiary |
| Where no beneficiary survives | The insured's estate |
| Medical expenses, at the insurer's option | The provider of the service |
The last two rows carry the provision's two special features. A facility of payment clause lets the insurer pay a modest amount to a relative where no beneficiary is named or the payee is a minor or incapable, which is a practical device that avoids a court appointment for a small sum. And the insurer may pay providers directly for medical expenses.
Texas prompt payment, which is a separate regime
The policy provision above is one thing. Texas also regulates claim settlement practices in the Insurance Code, and the Texas portion of the outline lists claims methods and practices under unfair trade practices, pointing at chapters 541 and 542.
So there are two ways an insurer can be wrong about timing. It can breach the policy provision, and it can commit an unfair claim settlement practice under the statute, which brings regulatory consequences rather than a contract remedy. The general portion tests the first. The Texas portion tests the second.
For life policies Texas puts the deadline in the statute: settlement after the insured's death must be made not later than two months after the insurer receives proof of death and of the claimant's right to the proceeds, at TIC 1101.011. That one we can quote because we hold the chapter.
An insured is receiving disability benefits under a policy that provides for monthly payments. She has been disabled for four months and expects to be for another year. When is she paid?
- Monthly as the policy provides, throughout the disability
- When the disability ends and total proof of loss is submitted
- Once a year, in arrears
- Only after the insurer has completed a physical examination
Where they sit
- Section
- VI, provisions, clauses and riders, 15 questions
- Listed as
- Mandatory and optional provisions, sub-items 8 and 9
- Preceded by
- Notice of claim, claim forms, proof of loss
- Texas portion
- Claims methods and practices, TIC 541 and 542
The opinion, and the concession
The single most useful trick on this pair is to read the question word first. When is time of payment. Who is payment of claims. Candidates who read the whole stem and then try to remember which provision has which name get it right about half the time, which on two adjacent sub-items is an expensive habit.
The concession: the period within which an insurer must pay after proof of loss, and the Texas prompt payment deadlines for clean claims, both live in sources we do not hold in full. The Insurance Code gives us the life settlement deadline and the unfair claim practice provisions. It does not give us a health claim payment clock we can quote, so this page names none.
Common questions
What is the difference between the two claim payment provisions?
Time of payment of claims sets how quickly the insurer must pay once it has proof of loss, including periodic payments during a continuing disability. Payment of claims sets who receives the money. One answers when, the other answers who.
Are disability benefits paid all at once?
No. For a continuing loss, benefits are paid periodically as the policy provides, with any balance payable when proof of the whole loss is received. A claimant who cannot work is not made to wait until recovery, which would defeat the point of income replacement.
What is a facility of payment clause?
A provision letting the insurer pay a modest benefit to a relative where no beneficiary is named, or where the payee is a minor or otherwise incapable of giving a valid receipt. It avoids the cost and delay of a court appointment for a small amount.
How quickly must a Texas life insurer pay a death claim?
The Insurance Code requires a life policy to provide for settlement not later than two months after the insurer receives proof of death and of the claimant's right to the proceeds, at TIC 1101.011. Health claim timing is handled by separate provisions and by the unfair claim settlement rules.