California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthHard
An agent is assisting a client in California with purchasing a new Accident and Health policy. The client is concerned about the policy's long-term availability and premium stability. Which renewability provision offers the greatest degree of protection to the insured regarding policy cancellation and premium increases?
- ANoncancellable
- BOptionally Renewable
- CConditionally Renewable
- DGuaranteed Renewable
Show answer & explanationAnswer & explanation
Correct answer: A. Noncancellable
A noncancellable policy offers the greatest protection because the insurer cannot cancel the policy, nor can it increase premiums, as long as the policyholder pays the premiums. Guaranteed renewable policies allow the insurer to increase premiums by class, but not cancel the policy.
Why the other options are wrong
- B. Optionally renewable policies allow the insurer to terminate the policy on any anniversary or premium due date.
- C. Conditionally renewable policies allow the insurer to terminate the policy under certain conditions stated in the contract, such as reaching a certain age.
- D. Guaranteed renewable policies assure renewal and cannot be cancelled by the insurer, but premiums can be increased by class.
Noncancellable Renewability Provision
A renewability provision in an Accident and Health policy that guarantees the policy will renew and that the premiums will remain level for the life of the policy, as long as premiums are paid.
- Highest level of insured protection
- Insurer cannot cancel
- Premiums cannot be increased
Memory trick: Renewability is a 'Stairway of Security', with 'Noncancellable' at the top, a fortress for your rates.