What Does Change of Occupation Provision Mean?
A change of occupation provision is a clause in an individual health insurance policy that provides the insurers the right to amend or make adjustments on the policy’s benefits and premium rates, especially when the insured changes his or her job position or career.
It benefits the insured whose job involves working in a hazardous environment. It also provides the insured a way to handle disability income claims. From the insurance company's perspective, this benefits them because they are able to charge an accurate rate for the amount of risk they are taking.
That said, not all policies have this provision built in so if such provision is not included in the policy, then no changes can be made. This can be disadvantageous to the insured as you would be paying a higher rate even if you are no longer working in that higher risk occupation.
Insuranceopedia Explains Change of Occupation Provision
Most health insurance policies are underwritten by the insurance company based on many factors. One important factor considered in underwriting is your occupation. Most people these days spend a large portion of their time at work. Aside from sleep, that is probably the activity we engage in the most on a daily basis.
This means that what you do for work has a great impact on your health and level of risk from the insurer's perspective. Some jobs - especially those involving manual labor or working with potentially hazardous machinery put insureds at higher risk of injury and disability than more sedentary office jobs. For insureds in those occupations, their health insurance premiums are likely to be higher and terms are more restricted.
If the insured changes his or her job to one that is categorized by the insurance company as less hazardous than the occupation stated in the policy at the time of application, the insurance company will reduce the premium rate and will return excess unearned premiums from the date when the occupation was changed or based on the anniversary date of the policy. For this to take effect, the insurer needs to provide a document or proof of change of the occupation.
On the other hand, if the insurer changes to a more hazardous job and got injured, then the insurance company will only cover the insurer at the rate of the premium that has been paid. Once the insurer got paid, the premium would increase thereafter once changes in the policy take effect.
Not only can this change of occupation provision be used to change premiums, it can also be used to change the terms and coverages offered by the policy. If you move to a less hazardous occupation, coverage can be expanded by the insurer. The opposite can occur if you are moving to a more hazardous occupation.