South Carolina Personal Lines Practice Exam

What does non-renewal indicate in an insurance policy?

1. The policy is automatically renewed

2. The insurer does not extend additional contract past expiration

3. The insured can renew at a different rate

4. The policy is reinstated after cancellation

The correct answer is: The insurer does not extend additional contract past expiration

Non-renewal in an insurance policy signifies that the insurer has decided not to extend the coverage once the current policy term expires. This means that after the policy reaches its expiration date, no further coverage will be provided, and the insurer is not obligating themselves to offer a new policy or a renewal of the current one. Understanding this concept is crucial for policyholders, as it highlights the importance of keeping track of their policy's renewal status and any communications from the insurer regarding future coverage. It indicates a definitive action taken by the insurance company, often due to various factors such as changes in risk, claims history, or shifts in the company's underwriting guidelines. The other options present scenarios that do not align with the definition of non-renewal. For example, automatic renewal implies the continuation of the policy, which is the opposite of non-renewal. Renewing at a different rate suggests the option for the insured to agree to new terms, while reinstatement after cancellation indicates that a policy can be restored, which does not relate to non-renewal.