Which of the following is true regarding a term health policy?
A. It is non-renewable
B. It is conditionally renewable
C. It is guaranteed renewable
D. It is noncancellable
Answer: A. It is non-renewable
Answer Explanation:
A term health policy is a type of health insurance policy that provides coverage for a specific period, usually ranging from one to ten years. It is different from a permanent health policy that provides coverage for the insured person’s entire lifetime. In a term health policy, the premium is generally lower, and the coverage is limited to the term of the policy.
One of the key characteristics of a term health policy is that it is non-renewable. This means that once the policy term expires, the insured person has to apply for a new policy if they want to continue their health coverage. The insurance company is under no obligation to renew the policy at the end of the term, even if the insured person has been paying premiums regularly.
The non-renewable nature of a term health policy can have both advantages and disadvantages. One of the advantages is that the premium is generally lower than that of a permanent health policy. This makes it an attractive option for people who want to have health coverage but cannot afford the high premiums of a permanent policy. Moreover, since the policy is for a limited period, the insured person can choose to renew or not renew the policy based on their changing needs.
However, the non-renewable nature of a term health policy can also be a disadvantage. If the insured person develops a health condition during the policy term, they may find it challenging to obtain coverage in a new policy. This is because the insurance company may consider the health condition as a pre-existing condition and either deny coverage or charge a higher premium. Moreover, if the insured person fails to renew the policy or forgets to do so, they may be left without health coverage when they need it the most.
It is important to note that the non-renewable nature of a term health policy is different from its cancellable or non-cancellable nature. A cancellable policy is one that the insurance company can cancel at any time for various reasons, such as non-payment of premiums, misrepresentation of information, or fraud. A non-cancellable policy, on the other hand, is one that the insurance company cannot cancel as long as the insured person pays the premiums on time.
In contrast to a cancellable policy, a term health policy is not cancellable by the insurance company during the policy term, provided the insured person pays the premiums on time. However, at the end of the policy term, the insurance company is under no obligation to renew the policy. This makes it different from a guaranteed renewable policy, where the insurance company is required to renew the policy at the end of the term, regardless of the insured person’s health condition.
In conclusion, a term health policy is a type of health insurance policy that provides coverage for a specific period, usually ranging from one to ten years. It is non-renewable, meaning that the insured person has to apply for a new policy if they want to continue their health coverage after the policy term expires. This can have both advantages and disadvantages, and it is important to understand the implications of the non-renewable nature of a term health policy before purchasing one.