Canadian Accredited Insurance Broker (CAIB) One Practice Exam

In the context of termination, which statement is untrue?

1. The insured must provide notice to the insurer

2. The insured is entitled to a premium refund upon termination

3. The insurer can adjust policy administration costs

4. A written request for termination must be submitted

The correct answer is: The insured is entitled to a premium refund upon termination

The statement that the insured is entitled to a premium refund upon termination is misleading under certain conditions. In the context of insurance policies, when a policy is terminated, whether a premium refund is applicable depends on the terms and conditions of the insurance contract itself. Typically, if the insured cancels the policy mid-term, they may be entitled to a partial refund of any unearned premium, which is the portion of the premium related to the remaining period of coverage. However, if the termination occurs due to reasons such as non-payment of premium or policy violations, the insurer might not issue a refund. The other statements about the termination process are generally accurate. The insured is usually required to notify the insurer regarding the termination, as it ensures proper administrative procedures are followed. Additionally, insurers may have policies concerning adjustments to administration costs, which aligns with maintaining the insured's financial implications properly. Lastly, requesting to terminate the policy typically requires a written request to provide a formal record of the decision. Thus, the conditions and procedures surrounding termination highlight why the entitlement to a premium refund is not universally applicable, making it an untrue statement in certain contexts.