Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceHard
A health insurance policy includes a provision that states the insurer cannot cancel the policy, and must renew it, as long as the premiums are paid. The premiums, however, can be adjusted by class. What type of renewability provision is this?
- ANoncancellable
- BConditionally Renewable
- COptionally Renewable
- DGuaranteed Renewable
Show answer & explanationAnswer & explanation
Correct answer: D. Guaranteed Renewable
Guaranteed Renewable means the insurer cannot cancel the policy and must renew it, as long as premiums are paid. However, the insurer can adjust premiums by class of insureds, meaning all insureds in a similar risk group would face the same premium increase, not just an individual.
Why the other options are wrong
- A. Noncancellable means the insurer cannot cancel the policy and cannot increase premiums. This is a stronger guarantee.
- B. Conditionally Renewable allows the insurer to refuse renewal under certain conditions specified in the policy.
- C. Optionally Renewable allows the insurer to renew or not renew at its option, with proper notice.
Guaranteed Renewable Provision
A health insurance policy provision ensuring the insurer cannot cancel or refuse to renew the policy, but reserves the right to increase premiums by class of insureds.
- Insured has right to renew.
- Insurer cannot cancel.
- Premiums can be increased, but only for an entire class, not individually.
Memory trick: Guaranteed Renewable: Renew, but rates might move.