The automatic broadening of coverage with no additional premium is known as what principle?

• A. Liberalization
• B. Subrogation
• C. Insurable Interest
• D. Utmost Good Faith

Answer: (A)

Liberalization means the insurer automatically expands coverage on existing policies without any extra premium or action required by the insured. This happens when an insurer updates its forms to include broader protections, and those broader coverages apply to current policies at no additional cost, as long as the increased coverage doesn’t raise the insurer’s risk beyond what was originally assumed.

This description fits liberalization precisely because it emphasizes automatic, no-cost broadening of coverage. The other terms refer to different concepts: subrogation is the insurer’s right to recover payments from a third party after paying a claim; insurable interest is the requirement that the insured have a legitimate stake in the subject of the insurance; utmost good faith is the duty to disclose all material information honestly.