Property and Casualty Insurance Practice Exam

What type of insurance policy charges a flat premium upon renewal?

1. Life insurance policy

2. Non-reporting policy

3. Health insurance policy

4. Liability insurance policy

The correct answer is: Non-reporting policy

A non-reporting policy is structured in a way that a flat premium is charged upon renewal. This type of policy does not require the insured to report their values or exposures periodically; instead, the premium is based on an estimated risk exposure that remains relatively constant over time. When the policy is renewed, the insurer typically assesses the same flat rate unless there are changes to the insured's situation or the underwriting guidelines. In contrast, life insurance policies often involve underwriting assessments that can affect premium rates based on the individual's age, health, and lifestyle changes at each renewal. Health insurance can fluctuate in premium costs based on a range of variables including claims and healthcare costs, and liability insurance policies may require regular adjustments based on changing business activities or exposure levels. Thus, the feature of a flat premium upon renewal is distinctly characteristic of non-reporting policies, aligning with how they manage risk and pricing.