What is the main purpose of the liberalization condition?

The liberalization condition in an insurance policy serves to automatically grant coverage upgrades to policyholders when the insurer expands or enhances coverage under existing policies without raising premiums. This condition ensures that if the insurer introduces broader coverage terms or removes exclusions for certain risks, policyholders benefit from these improvements without needing to modify their individual policies or incur additional costs.

By including the liberalization condition, insurers maintain customer satisfaction and competitive standing in the marketplace. It acts as an assurance to policyholders that they will benefit from any favorable developments in coverage that may occur during the policy term, thereby fostering trust in the insurer.

In contrast, other options do not accurately reflect the liberalization condition's purpose. Decreasing premium costs for high-risk policies does not align with its function, nor does it focus on the equal treatment of claims or limiting changes in policy terms. The essence of the liberalization condition is inherently about enhancing existing coverage rather than other aspects of the insurance policy framework.