An individual health insurance policy that is guaranteed renewable may be cancelled or nonrenewed by the insurer for which reason?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A guaranteed renewable policy is one the insurer may not cancel or refuse to renew, except for reasons specified in the policy, principally nonpayment of premium, fraud or material misrepresentation by the insured, or violation of the policy's terms. The insurer must keep the policy in force and may adjust premiums only for an entire class of policyholders, not for an individual. Deteriorating health, the filing of legitimate claims, or reaching a particular age are not valid grounds for cancellation of a guaranteed renewable policy, because those events are exactly the risks the policy is designed to cover.
Why the other options are wrong
- B) Deteriorating health is the very risk the policy exists to cover, so it cannot be a ground for cancelling a guaranteed renewable policy.
- C) Filing a legitimate claim is exercising the policy's purpose and is not a permissible reason for the insurer to terminate coverage.
- D) Reaching age 65 changes Medicare eligibility but does not by itself give an insurer the right to cancel a guaranteed renewable individual policy.
Memory hook
Guaranteed renewable = cancels only for money or fraud, never for bad health or claims.