Question

The ability to continue a term insurance contract without having to provide evidence of insurability best describes what option?

Answer 1

Step-by-step explanation:

The ability to continue a term insurance contract without having to provide evidence of insurability is commonly known as the "guaranteed renewable" option.

The guaranteed renewable option allows the policyholder to renew the term insurance contract for a specified period without the need to undergo a new medical examination or provide proof of insurability. This means that even if the policyholder's health condition changes or they develop new medical issues, they can still renew the policy at the end of the term.

This option provides flexibility and peace of mind for the policyholder, as it ensures that they can continue their insurance coverage without facing potential challenges or higher premiums due to changes in their health.

It's important to note that while the guaranteed renewable option allows for the continuation of the policy, the premiums may increase upon renewal based on factors such as age and overall risk assessment. However, the policyholder will not be denied the option to renew based solely on changes in their health status.

Answer 2

The ability to continue a term insurance contract without having to provide evidence of insurability is known as guaranteed renewability. This option protects individuals from losing insurance coverage due to changes in health or other risk factors and helps to mitigate issues related to adverse selection.

Step-by-step explanation:

The ability to continue a term insurance contract without having to provide evidence of insurability best describes the guaranteed renewability option. This feature ensures that policyholders can maintain their insurance coverage without any interruption due to their health or other risk factors.

With guaranteed renewability, individuals who have term insurance policies can renew them for a predetermined period, regardless of changes to their health status. Guaranteed renewability is critical in protecting individuals from losing their coverage at a time when they might be deemed a high risk and therefore uninsurable. It is also a way to address issues related to adverse selection, which occurs when insurance buyers are predominantly those who are likely to claim benefits.

With guaranteed renewability, the insurer anticipates that the pool of insured individuals will include both high risks and low risks, balancing out over time and allowing the market to function effectively.