Six months after the insured's HO-3 takes effect, the insurer files a broadened policy form with the state that adds coverage for an additional peril at no extra premium. How does the liberalization clause apply to the insured's existing policy?
a.The new coverage applies only if the insured pays an additional premium
b.The insured must request an endorsement to obtain the new coverage
c.The new coverage applies only at the next renewal
d.The broader coverage applies automatically to the existing policy
Explanation
The liberalization clause provides that if the insurer broadens a form during the policy period (or within a stated window before the policy started) without an additional premium, the broader coverage applies automatically to the existing policy. This protects the insured from having to wait for renewal to enjoy the improvement and avoids cumbersome endorsement procedures.
Law Reference: ISO Homeowners — Liberalization clauseThis topic, taught in full in the California Property & Casualty Broker-Agent guide. California Property & Casualty Broker-Agent Study Guide — 2026 Edition — PDF + EPUB, $24.99 · 14-day refund →
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