Guaranteed Renewable Contract
Definition - What does Guaranteed Renewable Contract mean?
A guaranteed renewable contract is a type of insurance policy contract that guarantees the policy will not be cancelled the following year if the insured acquires or develops a health condition.
Guaranteed renewable contracts are most relevant for health insurance, life insurance, and disability insurance, where the health of the insured has a greater effect on the risk the insurer takes on.
Insuranceopedia explains Guaranteed Renewable Contract
Guaranteed renewable contracts protect policyholders from being left uninsured after their policy is suddenly canceled due to a change in their health.
Insurers may be tempted not to renew a policy for an insured who has suffered a heart attack, for example, since this may result in them filing more frequent and more expensive claims. Guaranteed renewable contracts prohibit insurers from doing so.
If an insurer violates the terms of a guaranteed renewable contract by denying coverage the following year, the policyholder can bring the company to court to dispute the cancellation.