John Fraker, a building contractor, obtained a group health insurance policy from Sentry Life Insurance Company in 1978. A sales brochure for the policy stated that it would provide lifetime medical benefits.
Five years later, in 1983, Mr. Fraker suffered an injury to his right eye, which he eventually lost. Mr. Fraker paid the maximum co-payments due under the policy, and Sentry paid 100% of subsequent medical expenses.
However, in 1986, Sentry substituted a new group health insurance policy, and began paying only 80% of ongoing medical costs related to Mr. Fraker's eye injury. Finally, Sentry decided not to renew the group policy at all, and terminated the health insurance on December 1, 1988.
Mr. Fraker sued, claiming that Sentry breached its insurance contract and misrepresented the terms of the policy. The courts dismissed his lawsuit.The Court of Appeal conceded that a sales brochure for the insurance policy had falsely promised benefits "payable for the lifetime of the insured." In fact, the policy only provided coverage for costs incurred during the policy term.
However, the court decided that Mr. Fraker had no right to rely on that brochure, and found that the express language of the "master insurance policy" controlled. The master policy gave the insurance company the rights to alter its renewal terms and to cancel the policy.
Before you purchase any insurance, you should carefully review the written insurance policy. When you obtain any "group" insurance, consider that you may lose coverage or pay higher premiums for several reasons. Mr. Fraker suffered when the company cancelled the group policy; expect similar results if you decide to leave the "group," or if the "group" decides to change policies. For most health insurance, the "group" is comprised of fellow employees.
Usually, you must pay more to obtain the right to continuing coverage or fixed premiums, but that higher cost could be a bargain if you are later injured or disabled. If your insurance is cancelled at a time when you are ill or elderly, you may be unable to replace the insurance.
Be sure to read all the fine print. Some insurance policies with "level premiums" may provide declining levels of coverage as you age.
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