Guaranteed Insurability Option (Nachversicherungsgarantie)

Concept

A guaranteed insurability option is a contractually granted option right that allows the policyholder to increase existing coverage under a life, annuity, or disability insurance policy upon the occurrence of certain life events (e.g., marriage, birth of a child, purchase of a home, or completion of education), up to an agreed maximum limit, without requiring a new medical underwriting assessment.

Relevance for the Policyholder

A guaranteed insurability option protects the policyholder against the risk that a later increase in coverage would no longer be possible, or only on less favorable terms, due to a deterioration in health that has occurred in the meantime. It is particularly valuable for younger policyholders, whose insurance needs typically increase over time due to family and career changes.

Actuarial Treatment by the Insurer

Because the insurer waives a renewed risk assessment when the option is exercised, the associated anti-selection risk is already priced into the original tariff on a flat-rate basis; guaranteed insurability options are also generally tied to fixed deadlines and maximum amounts to limit the risk of a subsequent increase motivated by an adverse change in health.