What is considered to be characteristic of a conditionally renewable health insurance policy?

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1	Group health insurance policies are generally written on ______________ basis.

2	Which of the following would NOT be considered a basic form of coverage for health insurance plans?

5	In Florida, group health insurance policies are not required to offer coverage for alcoholism and drug dependency to the policyholder as an option.

6	Under a cancelable health insurance policy, the insurer must provide written notification of contract termination ______ days in advance.

7	Under which of the following policies can insurers increase premiums when the policy is renewed?

8	Which of the following policies does not allow insurers to increase premiums when the policy is renewed?

9	Premiums for health insurance are paid regularly for annually renewable benefits. Health coverage is subject to change year to year and premiums are subject to increases year to year.

10	Dividend payments are always guaranteed.

11	Which are the two major factors used to determine whether dividends or refunds will be issued?

13	Cafeteria plans are also called:

15	Which of the following characteristic(s) is/are associated with a disability buy-out plan?

16	A fictitious group is a group of persons who have gathered together strictly for the purpose of obtaining insurance.

17	Risks the insurance company takes when insuring people who have prior health problems are called:

18	Group short-term disability plans are characterized by maximum benefit periods of:

19	Group AD&D plans normally contain conversion privileges.

20	Under group long-term disability plans, benefit amounts are usually limited to approximately _______ of the participant's income.

21	Group long-term disability plans usually provide a benefit period of:

23	Under a group health plan, if the insured's out-of-pocket expenses exceed _______ of the individual's adjusted gross income, a tax deduction can be taken for expenses over and above that mark.

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Types of Insurance Coverage

The three main types of insurance coverage policies are as follows:

1. Optionally Renewable

Optionally renewable policies give the insurer the ability to cancel the policy on the anniversary date or premium due date.

The company can only raise premiums if there is a significant increase in the risk of future claims. Most people use an optionally renewable policy for disability insurance. The policy is also protected in case the insurance company announces a significant rate increase.

Another related concept is a conditionally renewable policy where there is no guarantee that the benefits provided to the policyholder in one year are renewed and provided in the following year. The insurer can choose to change the conditions of the policy with every passing year. A conditionally renewable policy is the least beneficial policy type.

2. Guaranteed Renewable

A guaranteed renewable policy, without the non-cancellable clause, is less comprehensive, and the policyholder can opt to make any changes to its insurance premium schedule and monthly benefits.

3. Non-Cancellable

Non-cancellable policies are also typically guaranteed renewable in nature. Non-cancellable policies ensure that as long as the premium is paid by the date specified, the policy terms or its premium cannot be changed (up until the age of 65 or as decided when purchasing the policy).

Guaranteed Renewable vs. Non-Cancellable Policies

Guaranteed renewable and non-cancellable policies share a few similarities and differences. The terms during the first three years of both types of policies will remain the same. During this time, the insurance premiums must be paid on time, and the policy provisions cannot be modified by the insurer.

In terms of the differences, for a guaranteed renewable policy, the rates can be changed after the first three years of the policy. The rate change is typically applicable to the entire risk class and not for an individual policy or person. A risk class can be segregated based on factors such as age, gender, or occupation.

For a non-cancellable policy, the policy rate remains the same even after the three years. Policies with a non-cancellable provision are also more expensive than guaranteed renewable, as the policyholder is protected from any rate increase announced by the insurance company.

Related Readings

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A conditionally renewable insurance policy contains a provision that permits the insurer to not allow a policy to be renewed under certain conditions. A conditionally renewable provision is generally offered to insureds in high-risk occupations and is frequently found in group or association type coverage.

Conditionally renewable policies are an insurer-friendly policy option, as it allows the insurer greater freedom to cancel, not renew, or increase premiums on a policy under certain conditions.
Conditionally renewable policies can be contrasted with noncancellable or guaranteed renewable policies, which are a more policyholder-friendly policy option.
Conditionally renewable policies have lower insurance premiums on average because they offer a lower coverage guarantee.

The conditionally renewable provision in an insurance policy allows an insurance company to cancel immediately, not renew at the renewal date, or increase premiums on a policyholder under certain conditions. This provision benefits the insurer, not the policyholder. A conditionally renewable policy may be renewed unless the specific conditions outlined in the policy occur.

For example, a conditionally renewable disability policy may not allow a policyholder to renew their disability policy after switching jobs. The insurer may place this condition on the insurance policy if the new job is considered more risky than the prior job. The insurer places this condition on the policy because the increased risk associated with the new job is more likely to result in the policyholder making an injury claim.

Regulators typically outline the conditions in which an insurer can terminate an insurance policy. In the case of health insurance, insurers are not allowed to terminate a policy based on the health of the policyholder. Insurers may offer several different renewal options for the policies that they underwrite, including both conditionally renewable and noncancellable policies.

On one end of the spectrum are policyholder-friendly options. These include noncancellable and guaranteed renewable policies. These allow the policyholder to continue renewing the policy without changes being made to the contract terms, and do not allow the insurer to add any conditions that may result in the policy being canceled. The premiums for a noncancellable and guaranteed renewable policy do not change during the noncancellable period, and the policy is guaranteed to renew.

On the other end of the spectrum are insurer-friendly options. These include conditionally renewable, cancellable, and optionally renewable policies. These allow the insurer to place conditions that allow the policy to be canceled at any time or not renewed at the next renewal date if conditions are not met. The insurer may increase the insurance premium on the policy if it does decide to let the policyholder renew for another period.

Under a conditionally renewable policy, an insurer retains considerable power to cut its claims losses by refusing to renew coverage. Because of this ability, such policies generally have significantly lower premiums than either noncancellable or guaranteed renewable coverage. However, the lower premium comes with a consequence for the policyholder in the form of an equally significant reduction in coverage guarantee. Nevertheless, as long as the insured meets the conditions of renewability and remits the required premium on a timely basis, the insurer guarantees not to cancel the policy.