What does renewal of an insurance policy refer to?

Renewal of an insurance policy refers to the process of extending the policy coverage beyond its original term. This typically involves the insured continuing to pay premiums to maintain coverage, at which point the insurer provides a renewed policy. The renewal process ensures that the coverage remains in effect without requiring a complete reapplication or underwriting assessment, although changes in policy terms and premium amounts can occur.

When a policy is renewed, it signifies that the insurer and the insured agree to continue the relationship under similar conditions as the previous term, although adjustments may be made based on changes in risk or company policy. This continuity is beneficial as it helps the insured avoid any coverage gaps that could expose them to risk during the interim period between policy expiration and renewal.

In contrast, other options describe different concepts. Modification of policy terms involves altering the specifics of the existing agreement rather than extending the policy. Termination of coverage indicates that the policy will no longer be in effect after the initial period, while replacement of the policy with a new one suggests starting over with a different contract instead of renewing the current one.