What happens when an insurer liberalizes its policy?

When an insurer liberalizes its policy, it typically means that the insurer is offering broader coverage or more favorable terms without an increase in premium costs. This liberalization is particularly advantageous for existing policyholders, as it automatically extends the new terms or enhancements to their current policies. This principle stems from the idea of protecting policyholders, whereby any improvements in coverage are applied retroactively to ensure that all customers benefit equally, not just new ones.

For example, if a new line of coverage is added to a policy or existing terms are made more lenient, all policyholders, including those who held their policies before the liberalization took place, will benefit from these improvements. This practice not only fosters customer loyalty but also helps maintain a competitive edge in the insurance market by drawing in new customers through enhanced policy provisions while ensuring current customers feel valued. Therefore, existing policyholders automatically receive expanded coverage when such a liberalization occurs, making this the correct choice.