What is the implication of a guarantee of renewability for insurance policies?

The correct interpretation of a guarantee of renewability in insurance policies is that it allows for the policy to be renewed, but the insurer can adjust the premium amount during the renewal process. This means that while the policyholder has the assurance that they can continue their coverage without being denied by the insurer, the financial terms—including the premium—can be altered based on risk factors, claims history, or changes in underwriting guidelines.

This feature helps maintain a balance in the insurance market, allowing insurers to manage risks while still providing policyholders with the option to renew their coverage. It ensures that individuals who have claims or represent a higher risk do not lose access to insurance altogether, but acknowledges that the cost of that coverage may reflect the increased risk.

The guarantee of renewability does not imply that the insurer cannot change the premium amount at renewal; rather, it emphasizes the obligation of the insurer to allow the policyholder to maintain their coverage as long as they continue to pay the adjusted premium.