State RegulationsMI specificDifficulty 2/5
An insured in Sterling Heights holds a guaranteed renewable individual disability policy and has paid every premium. After he has been disabled for several months and is drawing benefits, the insurer decides it would prefer to stop renewing his policy to avoid continued claims. What is the correct outcome?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Guaranteed renewable status under Michigan's renewability framework, including classifications under M.C.L. 500.2213b, binds the insurer to continue the coverage as long as the insured pays premiums. Drawing disability benefits is exactly the situation the classification protects: the insurer cannot use an ongoing claim as a reason to shed the contract. Its only pricing recourse is a premium change applied to the entire class of insureds, never a targeted nonrenewal of one claimant.
Why the other options are wrong
- A) Ongoing claims are precisely why guaranteed renewable protection exists; claim experience is not a permitted nonrenewal ground.
- B) No consent mechanism exists; the classification simply prohibits nonrenewal while premiums are paid.
- D) Guaranteed renewable status binds the insurer to this policy regardless of what happens to other policies; class-wide repricing is the only permitted adjustment.
Memory hook
Disabled and drawing benefits? Guaranteed renewable means they must keep you.