Manitoba Fundamentals of Insurance Exam A Practice

Policy renewal in the insurance field refers to the process of extending an insurance policy for another specified term. This typically involves the insured and the insurer agreeing to continue the coverage beyond its original expiration date. During the renewal process, the insurer may review the policyholder's circumstances, which can influence coverage terms and premium rates for the new term.

Renewal is an important aspect of insurance because it allows the insured to maintain continuous coverage without having to reapply for a new policy. This can be particularly beneficial to the policyholder as it may prevent any potential loss of coverage that could occur if a new policy were to be initiated after a gap.

In contrast, termination of an existing insurance policy signifies that the coverage has ended, switching to a different provider means obtaining coverage from a new insurer rather than continuing with the current one, and adjusting premium rates based on claims history involves reassessing the cost of the policy based on the insured's previous claims, rather than on the renewal process itself.