The terms “noncancelable” and “guaranteed renewable” are often used when referring to disability income insurance policies. What do these terms imply, and how do they differ?
“Noncancelable” policies provide insureds with the right to renew their policies each year, typically to age 65, by the timely payment of the required premium. A guaranteed premium is stipulated in the contract and may not be changed by the insurer. During the noncancelable period, the insurer is precluded from canceling the contract or otherwise making any unilateral change in the policy benefits. “Guaranteed renewable” contracts also provide insureds with the right to renew their policies to age 65 (typically) through the timely payment of the premium. However, under “guaranteed renewable” policies, the insurer retains the right to change premiums if it does so for all insureds in the same rating class. The insurer is not permitted to cancel the policy or unilaterally amend the policy benefits during the period that the policy is guaranteed renewable. Further, under both types of contracts, the insurer is not permitted to increase the premiums, on a selective basis, only for those in
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