South Carolina Insurance Practice Exam

Which of the following terms refers to the right to renew a term insurance policy?

1. Convertible feature

2. Non-cancelable clause

3. Guaranteed renewability

4. Automatic reinstatement

The correct answer is: Guaranteed renewability

The term that refers to the right to renew a term insurance policy is known as guaranteed renewability. This feature allows the policyholder to extend the term of the insurance coverage without having to provide proof of insurability, which means that the insurer must provide the renewal option as long as the premiums are paid and other conditions of the policy are met. Guaranteed renewability is particularly valuable for individuals whose health may deteriorate over time, as it ensures that they won't be denied coverage due to medical reasons when they seek to renew their policy. This feature enhances the security and flexibility of term life insurance by providing policyholders with access to coverage for an extended period. In contrast, the convertible feature allows term policies to be converted into permanent policies without undergoing proof of insurability, but it does not inherently guarantee renewal beyond the initial term. A non-cancelable clause is a provision that prevents the insurer from canceling the coverage for any reason other than non-payment of premiums but does not specifically relate to renewal rights. Automatic reinstatement refers to the process where a policyholder can automatically restore a lapsed policy without having to go through a new application process, but again, this does not pertain to the renewal of the term coverage itself. Each of