Texas General Lines — Life, Accident, Health and HMOHealth InsuranceHard
An agent is explaining the renewability provisions of a health insurance policy. The policy states that the insurer cannot cancel the policy, raise premiums, or make any changes to the policy as long as the premiums are paid. This type of renewability is known as:
- AConditionally Renewable
- BGuaranteed Renewable
- COptionally Renewable
- DNoncancellable
Show answer & explanationAnswer & explanation
Correct answer: D. Noncancellable
A noncancellable policy is the most favorable to the insured as it guarantees renewability and that premiums cannot be increased, nor benefits reduced, as long as premiums are paid. The insurer cannot change any policy provisions.
Why the other options are wrong
- A. Conditionally renewable means the insurer can refuse to renew under certain conditions specified in the policy.
- B. Guaranteed renewable means the insurer cannot cancel, but can increase premiums for an entire class of insureds.
- C. Optionally renewable means the insurer can choose not to renew for any reason.
Noncancellable Renewability
A health insurance policy provision guaranteeing the insured's right to renew the policy, and that the premiums cannot be increased and benefits cannot be reduced, as long as premiums are paid.
- Most protective renewability clause for the insured
- Insurer cannot unilaterally change policy terms or rates
- Typically found in disability income policies
Memory trick: Noncancellable: 'No' cancels, 'No' raises, 'No' changes.