California Life and Health Insurance Practice Exam

The type of policy that allows the insurer to terminate coverage on a date stated in the contract is known as optionally renewable. This means that while the insured has the right to renew the coverage, the insurer has the discretion to decide whether to continue the policy on each renewal date. Consequently, it is not an automatic renewal, and the insurer's choice implies that they can opt to end the coverage without meeting specific conditions that would apply in a guaranteed renewable policy.

In contrast, a guaranteed renewable policy requires the insurer to renew the policy regardless of the insured's health status, making the coverage more secure for the insured. Nonrenewable policies, by definition, do not allow for any renewal and terminate at the end of the coverage period. Renewable term, typically associated with life insurance, does not fully encapsulate the nuances regarding the insurer's ability to choose termination on specific dates. Therefore, the correct classification for a policy that gives the insurer the option to terminate is indeed optionally renewable.