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A risk policy provides that the premium will increase every year. What does the General Code require the provider to disclose about those increases before the client buys?

RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.

  1. a) The increased premium for the first year only, with later increases notified as they occur.
  2. b) The percentage by which the premium increases, without any rand amounts, for the life of the policy.
  3. c) The increased premium for every year of the policy up to the expected date of death of the client.
  4. d) The increased premium for the first five years, and then at five-year intervals for up to twenty years.Correct

Why this is the answer

For an insurance product where provision is made for premium increases, the provider must disclose the amount of the increased premium for the first five years and thereafter on a five-year basis, but not exceeding twenty years. A first-year figure or a bare percentage does not show the client what the cover will really cost over time.

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