South Carolina Life and Health Practice Exam

Which of the following might be a reason for terminating a health insurance policy?

1. Failure to pay premium on time

2. Changing health status of the insured

3. Reaching retirement age

4. Full payment of benefits

The correct answer is: Failure to pay premium on time

The termination of a health insurance policy can indeed occur due to the failure to pay premiums on time. Insurers require policyholders to meet their financial obligations, and consistent premium payments are vital for maintaining coverage. If a policyholder fails to make payments by the due date, the insurer may have grounds to cancel the policy, as the payment of premiums is a fundamental condition for the insurance contract to remain in effect. In contrast, other options may not necessarily lead to automatic policy termination. For instance, while changing health status might alter coverage options or premiums, it does not automatically result in cancellation. Reaching retirement age may affect the type of health coverage available, but it typically does not terminate an existing policy. Similarly, full payment of benefits does not cancel a policy; rather, it signifies that the insurer has fulfilled its obligation under the terms of the policy, but the policy may still remain active depending on its provisions. Thus, not paying premiums is a clear and actionable reason for an insurer to terminate a policy, making it the most applicable choice in this scenario.