Property & Casualty Insurance Exam (National Portion)Property and Casualty Insurance BasicsMedium
An insurance policy contains a clause that states if the insurer adopts any revision that broadens coverage without additional premium, the broadened coverage will automatically apply to the policy. This is known as the:
- ALiberalization Clause
- BSeverability Clause
- CPro Rata Liability Clause
- DNon-concurrency Clause
Show answer & explanationAnswer & explanation
Correct answer: A. Liberalization Clause
The Liberalization Clause is a policy provision that states if the insurer broadens coverage under a policy form or endorsement without charging an additional premium, the broadened coverage will automatically apply to all existing policies of the same type.
Why the other options are wrong
- B. The Severability Clause states that insurance applies separately to each insured, as if each were the only insured.
- C. The Pro Rata Liability Clause addresses how multiple policies covering the same loss will share the payment, based on their proportion of the total insurance.
- D. Non-concurrency refers to different insurance policies covering the same property with different terms or effective dates.
Liberalization Clause
A policy provision stating that if an insurer broadens coverage without extra charge during the policy period, the broadened coverage automatically applies to existing policies.
- Benefits the insured by automatically updating coverage.
- Applies only if no additional premium is charged.
- Ensures all policyholders receive the most up-to-date standard coverage.
Memory trick: Provisions: The 'PRO-mises' and 'PRO-cedures' inside your policy.