Arizona Life and Health Practice Exam

Which of the following could result in a reduction of benefits in an insurance policy?

1. Policy lapsing

2. Premium payment method

3. Policy amendment

4. Claims filing

The correct answer is: Policy lapsing

In the context of insurance policies, when a policy lapses, it typically means that the policyholder has failed to pay the required premiums, resulting in the termination of the coverage. When a policy lapses, the insurer is no longer obligated to provide benefits, which can lead to a loss of or reduction in coverage. If the policyholder later wishes to reinstate the policy, they may face reduced benefits or increased premiums based on their current health status or changes in the insurance market. Other factors, such as the premium payment method or policy amendments, might affect how benefits are delivered or structured but do not inherently cause a reduction in benefits. Claims filing is necessary to access benefits and does not itself cause a reduction in the benefits available under the policy. Therefore, lapsing is the most direct cause of reduced benefits in this context.