Under a cancellable health insurance policy, which right does the insurer typically retain?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A cancellable policy is the least favorable to the insured because the insurer may terminate coverage at any time, provided it gives the notice required by the policy and by law. No stated reason is necessary, so cancellation rests entirely in the insurer's discretion and can occur even while the insured is in good health. Because of this instability, cancellable policies are uncommon in modern individual health insurance and are priced accordingly. The renewability level chosen, whether cancellable, optionally renewable, conditionally renewable, guaranteed renewable, or noncancelable, determines how much protection the insured retains against termination and premium changes.
Why the other options are wrong
- B) Filing a claim is not a precondition for cancellation; the insurer's discretion under the policy terms is the deciding factor, and cancellation may occur with or without a pending claim.
- C) A cancellable policy permits outright termination of coverage, so the insurer's power is not limited to changing premiums; both cancellation and premium adjustment are available to it.
- D) Limiting non-renewal to a change in occupation is the hallmark of a conditionally renewable policy, not a cancellable policy, which carries no such restriction on the insurer's right to cancel.
Memory hook
Cancellable = insurer can pull the plug anytime with notice. Weakest renewability, cheapest protection.