What is considered a mandatory provision?


Editorial team Published on

A mandatory provision is a required clause or rule set by law or regulatory standards that must be included in a legal contract, such as a health or life insurance policy.

Purpose of Mandatory Provisions

  • Protect the insured: They safeguard policyholders from unfair practices, sudden changes, or hidden exclusions.
  • Ensure uniformity: Modeled by groups like the National Association of Insurance Commissioners (NAIC), they create standard terms across policies.
  • Define rights and duties: They clearly state what both the insurance company and the customer must do.

Common Examples in Health Insurance

  • Entire Contract: States that the policy, application, and any attached riders form the complete agreement, and agents cannot change it.
  • Grace Period: Gives extra time (such as 31 days) to pay a late premium before coverage ends.
  • Reinstatement: Explains the rules for restoring a lapsed policy after paying overdue amounts.
  • Notice of Claim: Requires the insured to notify the company of a loss within a set time frame, usually 20 days.
  • Time Limit on Certain Defenses: Stops the insurer from denying a claim due to misstatements on an application after a period of two years (except for fraud).