Question

Which of the following best describes liberalization clause in a policy?

1) The insured may assign the policy to any person without their written consent
2) The policy cannot be cancelled
3) Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium
4) The insurer is relieved of its contractual obligation to the insured.

Answer 1

A liberalization clause in an insurance policy refers to changes made by the insurer that broaden coverage and automatically apply to the policy without any additional cost to the policyholder.

Step-by-step explanation:

In the context of an insurance policy, a liberalization clause refers to changes adopted by the insurer that broaden coverage and automatically apply to the policy at no additional premium.

This means that if the insurer makes any changes to the policy that result in increased coverage, the policyholder will benefit from these changes without having to pay an extra premium. It is a way for the insurer to enhance the policy without any additional cost to the policyholder.