Texas Property and Casualty License Practice Exam

What is required from an insurer in the event of a cancellation of a policy?

1. Immediate payment of benefits

2. A 10-day advance written notice to the insured

3. A 30-day written notice for review

4. No notice is necessary

The correct answer is: A 10-day advance written notice to the insured

In the event of a cancellation of a policy, insurers are required to provide a 10-day advance written notice to the insured. This requirement is in place to ensure that policyholders are adequately informed about the cancellation prior to its effective date. This notice period allows the insured to make necessary arrangements for alternative coverage or address any outstanding issues related to the policy. This notice is particularly important as it provides transparency in the insurance process and helps maintain a good relationship between the insurer and the insured. Having such a timeframe also allows for any potential disputes or misunderstandings regarding the cancellation to be addressed before the policy is officially terminated. Other options do not align with standard regulatory practices regarding policy cancellations. Immediate payment of benefits is not typical, as cancellation usually involves the termination of coverage rather than the distribution of benefits. A 30-day written notice may be common in some contexts, but the specific requirement for cancellation is typically shorter. Lastly, no notice being necessary would not comply with the standards set forth for providing sufficient notice to holders of insurance policies.