Question 43

Only with a noncancellable policy can the insurer never raise premiums.

A noncancellable policy guarantees that the insurer cannot increase the premiums for the duration of the policy, regardless of changes in the insured's circumstances or claims history.

A) retain the right to refuse to renew the policy at a certain age

This option is incorrect because a noncancellable policy obligates the insurer to continue coverage, regardless of the insured’s age, as long as premiums are paid. In contrast, a guaranteed renewable policy may allow the insurer to refuse renewal based on the age of the insured.

B) cancel for excessive claims

This choice is incorrect as well. A noncancellable policy cannot be cancelled for excessive claims; it is designed to provide continuous coverage and financial protection without the risk of cancellation based on claims experience.

C) allow renewal of policy for 5 years if the insured is over age 54

This option is also incorrect. A noncancellable policy does not impose restrictions based on age or limit the duration of renewal; it guarantees coverage as long as premiums are paid, unlike a guaranteed renewable policy which may have such stipulations.

D) never raise premiums

This option is correct because noncancellable policies ensure that premiums remain fixed throughout the life of the policy. The insurer cannot raise the premiums, providing financial certainty to the policyholder.

Conclusion

The primary distinction lies in the guarantee of premium stability offered by noncancellable policies, which prohibits any increase in premiums. All other options fail to capture the fundamental characteristic of a noncancellable policy, which is the assurance against premium hikes, making option D the only correct choice.