Conditionally Renewable Policy

What is 'Conditionally Renewable Policy'

An insurance policy provision that allows the insurer to not allow a policy to be renewed under certain conditions. A conditionally renewable policy can be renewed unless the conditions outlined in the policy occur.

BREAKING DOWN 'Conditionally Renewable Policy'

A provision that allows an insurance company to cancel or not renew a policy benefits the insurer, not the policyholder. Insurers may offer several different renewal options for the policies that they underwrite.

On one end of the spectrum are policyholder-friendly options. These include non-cancellable and guaranteed renewable policies. These allow the policyholder to continue renewing the policy without changes being made to the contract terms, and do not allow the insurer to add any conditions that may result in the policy being canceled. The premiums for a non-cancellable and guaranteed renewable policy do not change during the non-cancellable period, and the policy is guaranteed to renew.

On the other end of the spectrum are insurer-friendly options. These include conditionally renewable, cancelable, and optionally renewable policies. These allow the insurer to place conditions that allow the policy to be canceled at any time or not renewed if conditions are not met. The insurer may increase the insurance premium on the policy if it decides to let the policyholder renew for another period.

An example of a condition placed on a conditionally renewable disability policy could be when a policyholder is unable to renew a policy if a new job is considered more risky than the current job. The reason behind the condition is that the increased risk associated with the new job is more likely to result in the policyholder making an injury claim.

Regulators typically outline the conditions in which an insurer can terminate an insurance policy. In the case of health insurance, insurers are not allowed to terminate a policy based on the health of the policyholder.