Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceHard
An insurance agent is explaining the concept of 'waiver' to a client. Which of the following scenarios best exemplifies a waiver in an insurance context?
- AAn insurer accepting overdue premiums without requiring a reinstatement application, thereby giving up its right to deny coverage for the lapse.
- BAn applicant intentionally concealing a material fact on their insurance application.
- CAn insurer denying a claim because the policyholder failed to pay premiums on time.
- DA policyholder requesting a change to their coverage, which the insurer then approves.
Show answer & explanationAnswer & explanation
Correct answer: A. An insurer accepting overdue premiums without requiring a reinstatement application, thereby giving up its right to deny coverage for the lapse.
A waiver is the voluntary relinquishment of a known right. In this scenario, the insurer has the right to deny coverage for the lapse due to overdue premiums but voluntarily gives up that right by accepting the payment without requiring the usual reinstatement process.
Why the other options are wrong
- B. This describes concealment, a form of misrepresentation or fraud, not a waiver by the insurer.
- C. This is an insurer enforcing a policy condition, not waiving a right.
- D. This describes a policy modification or endorsement, not a waiver of a right by either party.
Waiver (Insurance)
The voluntary relinquishment of a known right. It can occur explicitly (in writing) or implicitly (through actions).
- Often involves an insurer giving up a right it had under the policy.
- Can prevent an insurer from later enforcing that right.
- Related to 'estoppel', which prevents a party from reasserting a right after a waiver.
Memory trick: Waiver gives up a right, Estoppel stops a fight.