How many claims in the last 3-year period would allow the insurer to decline renewal?

• A. 1 claim
• B. 2 claims
• C. 3 or more claims
• D. 4 or more claims

Answer: (C)

Underwriting uses past claims to gauge future risk. If a policyholder has three or more claims in the previous three years, the insurer typically views the risk of another claim as elevated enough to justify not renewing the policy. This pattern of losses signals ongoing risk, so declining renewal helps the insurer limit potential future losses. Fewer than three claims may still be renewals depending on the claim type and the policy, but reaching three or more is the threshold where nonrenewal becomes a standard option under many guidelines. (Note that actual rules can vary by policy language and state law, and proper notice requirements still apply when nonrenewing.)