Final answer:
An insured person may not be eligible for a refund upon policy termination if they've already received payouts for claims or if the termination contributes to an imbalance in risk that would financially harm the insurance company due to adverse selection.
Step-by-step explanation:
The insured may not be eligible for a refund in certain conditions when terminating a policy. If the policy is a type where it pays out under various situations such as when medical expenses are incurred, the policyholder dies, a car is damaged, stolen, or causes damage to others, or a dwelling is damaged or burglarized, any claims filed or payouts received may negate eligibility for a refund. Additionally, in cases where adverse selection affects the market, companies may be discouraged from issuing refunds to prevent financial losses and maintain balance in the insurance pool. This scenario, along with government regulations, plays a crucial role in determining if a refund is possible. Moreover, if premiums are raised to cover high-risk individuals, those with lower risks might opt out, making refunds less feasible.