What is a guaranteed renewable policy in insurance?

A guaranteed renewable policy is one where the insurer is required to renew the policy as long as the insured continues to pay the premiums on time. This means that the policyholder has the right to keep the coverage in force without any obligation from the insurer to decline renewal based on changes in the insured's health or other factors. This feature provides important security and peace of mind for policyholders, as it protects them from losing their coverage unexpectedly.

In this type of policy, while premiums may increase at renewal, the insurer cannot refuse renewal or change the terms based on the insured's claims history, provided that the insured fulfills their obligation to pay premiums. Many health and disability policies operate under this concept to provide continued coverage to individuals regardless of their changing circumstances.

This contrasts with other policy types that may allow insurers to adjust terms or refuse renewal based on risk assessments, claim history, or their discretion, which is not the case in a guaranteed renewable policy.