What does a Liberalization Clause in an insurance policy do?

A Liberalization Clause in an insurance policy is designed to automatically apply broader coverage to existing policies without requiring the policyholder to take any action. This clause ensures that if the insurer makes changes to the policy that expand coverage, those changes will automatically extend to all similar existing policies, not just new ones issued after the change. This is beneficial for policyholders as it helps protect them from potential gaps in coverage that could occur during the life of their policy as the insurer adapts to new standards or develops more comprehensive coverage options.

Other choices, such as the automatic increase of premiums or the requirement for additional fees, do not align with the function of a Liberalization Clause. It is specifically intended to enhance coverage, not restrict it or impose additional costs.