Guaranteed Renewable Contract
What Does Guaranteed Renewable Contract Mean?
A guaranteed renewable contract is an insurance policy that ensures the policy will not be canceled in the following year, even if the insured develops a health condition.
These contracts are particularly relevant in health, life, and disability insurance, where the insured’s health significantly impacts the risk undertaken by the insurer.
Insuranceopedia Explains Guaranteed Renewable Contract
Guaranteed renewable contracts protect policyholders from being left uninsured if their policy is suddenly canceled due to a change in their health.
For instance, an insurer might be reluctant to renew a policy for someone who has suffered a heart attack, as this could lead to more frequent and costly claims. However, guaranteed renewable contracts prevent insurers from doing so.
If an insurer breaches the terms of a guaranteed renewable contract by denying coverage in the following year, the policyholder has the right to take the company to court to challenge the cancellation.
