State RegulationsMI specificDifficulty 2/5
A Michigan resident buys an individual long-term care policy and pays her premiums on time for years. Her health then deteriorates and she begins needing substantial help with daily activities. Under Michigan's guaranteed renewable requirement for individual long-term care policies, the insurer:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Michigan requires individual long-term care policies to be guaranteed renewable (M.C.L. 500.3907, within M.C.L. 500.3901 to 500.3955). Guaranteed renewable status means the insurer cannot cancel or nonrenew the policy, and cannot single out this insured for a rate increase, because of her age, health change, or claims, so coverage remains in force as long as premiums are paid. This is precisely the protection a deteriorating insured relies on most.
Why the other options are wrong
- B) Cancelling or nonrenewing once the insured begins needing care is exactly what the guaranteed renewable requirement forbids.
- C) Entering a claim does not force the policy into paid-up nonforfeiture status; the policy continues in force with full benefits while premiums are paid.
- D) Guaranteed renewable status prevents the insurer from re-rating this individual because of her own health change or claim history.
Memory hook
Guaranteed renewable: pay the premium, keep the policy, even when health fails.