A health insurance policy is cancelled for nonpayment of premium while the insured is receiving treatment for a covered illness that began while the policy was in force. Under a typical extension-of-benefits provision, what happens?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The extension-of-benefits (extended benefits) provision protects an insured who becomes ill or injured while the policy is in force and is still receiving treatment when the policy terminates. It continues payment for that condition for a limited period after termination — typically a specified number of days or up to a maximum benefit — even though the policy itself is no longer active. The purpose is to avoid cutting off care mid-treatment for a covered condition that arose during the policy period. This is a standard contract provision tested under individual health policy terms (AH-III.A.1d).
Why the other options are wrong
- B) Immediate cutoff with no exception is the opposite of the provision's purpose; extension of benefits exists precisely to bridge coverage during an active course of treatment.
- C) The insurer is not required to renew an unpaid policy indefinitely; the provision only continues benefits for a stated limited period, not until cure.
- D) Extension of benefits applies to a covered sickness or injury that began while the policy was in force; it is not limited to accidents.
Memory hook
Benefits outlive the policy for a condition born during the policy — but only for a limited stretch.