California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthMedium
A 40-year-old individual in California has an individual Accident and Health policy with a 'Guaranteed Renewable' provision. After five years, the insurer decides to increase the premium for all policies in this class due to rising healthcare costs. Which of the following statements is true regarding this situation?
- AThe insurer can cancel the policy if the insured refuses to pay the increased premium.
- BThe insurer can increase the premium for the entire class of policyholders, but not for individual policyholders.
- CThe insurer cannot increase the premium under any circumstances due to the 'Guaranteed Renewable' provision.
- DThe insurer must obtain the individual insured's consent before implementing any premium increase.
Show answer & explanationAnswer & explanation
Correct answer: B. The insurer can increase the premium for the entire class of policyholders, but not for individual policyholders.
A 'Guaranteed Renewable' provision allows the insurer to increase premiums on a class basis, but not for individual policyholders. The policy cannot be canceled as long as premiums are paid.
Why the other options are wrong
- A. This is incorrect. The policy cannot be canceled by the insurer as long as premiums are paid, even if they are increased.
- C. This is incorrect. Premiums can be increased on a class basis under a guaranteed renewable provision.
- D. This is incorrect. Insurer does not need individual consent for a class-wide premium increase.
Guaranteed Renewable Provision (A&H)
A provision in an Accident and Health policy that guarantees the insured's right to renew the policy, but allows the insurer to increase premiums by class.
- Insured cannot be canceled by the insurer (except for non-payment)
- Premiums can be increased, but only for an entire class of policies, not individually
- Coverage generally continues to a specified age (e.g., 65)
Memory trick: Renew for sure, but premiums might stir, only if all policies concur.