Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Health InsuranceEasy
A client, age 45, is covered by a health insurance policy that includes a Guaranteed Renewable provision. Which of the following best describes the implications of this provision for the client?
- AThe policy will renew automatically at the same premium rate until the client reaches age 65.
- BThe insurer can only cancel the policy for non-payment of premiums or fraud, and premiums are fixed.
- CThe insurer can cancel the policy at any time with 30 days' notice but must refund any unearned premium.
- DThe insurer cannot cancel the policy, but it can increase the premium for the entire class of policyholders.
Show answer & explanationAnswer & explanation
Correct answer: D. The insurer cannot cancel the policy, but it can increase the premium for the entire class of policyholders.
A Guaranteed Renewable provision ensures that the insurer cannot cancel the policy, but it does allow the insurer to increase premiums on a class basis, not individually.
Why the other options are wrong
- A. The premium rate is not guaranteed to remain the same; it can increase.
- B. While cancellation is limited, premiums are not fixed and can be increased for the class.
- C. This describes a cancellable policy, not guaranteed renewable.
Guaranteed Renewable Provision
A health insurance provision that guarantees the policyholder the right to renew the policy, but allows the insurer to increase premiums for an entire class of insureds.
- Insurer cannot cancel the policy.
- Insurer can increase premiums by class.
- Coverage typically continues to age 65 or beyond.
Memory trick: Renewing with a guarantee means you're safe, but your wallet might not be.