A health insurance policy that is 'guaranteed renewable' permits the insurer to:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Guaranteed renewable means the insurer must continue the policy in force as long as premiums are paid, and it may not single out an individual for cancellation or nonrenewal. However, the insurer is permitted to raise premiums, provided the increase applies to an entire class or book of similar policyholders rather than to one insured's claims experience or health condition. This protects the individual from discriminatory treatment while preserving the insurer's ability to adjust rates for broad classes over time. The noncancelable contract is even stronger because it also restricts the insurer's ability to change premiums for the policyholder at all.
Why the other options are wrong
- B) Cancellation at any time without cause would describe a cancellable policy, the weakest renewal protection. A guaranteed renewable contract cannot be canceled mid-term except for reasons such as nonpayment of premium.
- C) Raising one individual's premium based on that person's health or claims is exactly the discriminatory treatment that guaranteed renewable status prohibits. Rate changes under this contract must apply class-wide.
- D) Denying renewal because of claims history is not permitted under guaranteed renewable language. The insurer must renew the policy as long as premiums are paid and the policy remains eligible.
Memory hook
Guaranteed renewable = can't drop you, can't single you out — but can raise rates for everyone like you.