Property & Casualty Insurance Exam (National Portion)Property and Casualty Insurance BasicsEasy
A homeowner's insurance policy includes a clause that automatically extends coverage to include improvements or broader coverage if the insurer adopts a revision that broadens coverage without additional premium. Which policy provision is this?
- AAppraisal clause
- BSubrogation clause
- CAssignment clause
- DLiberalization clause
Show answer & explanationAnswer & explanation
Correct answer: D. Liberalization clause
The liberalization clause ensures that if the insurer makes policy changes that broaden coverage without extra cost, the insured automatically benefits from these improvements. This provision prevents the need for policy reissue or specific endorsements for such changes.
Why the other options are wrong
- A. Appraisal is used to resolve disputes regarding the amount of a loss.
- B. Subrogation allows the insurer to pursue a third party responsible for a loss.
- C. Assignment typically requires the insurer's written consent to transfer policy ownership.
Liberalization Clause
A policy provision that states if the insurer adopts any revision that broadens coverage without additional premium, the broadened coverage will automatically apply to the existing policy.
- Automatically broadens coverage
- No additional premium required
- Applies to existing policies
Memory trick: LIBERATED policies get better for FREE!