What type of insurance contract may be renewed at the option of the insurer but can be canceled by them?

The correct answer is a cancellable contract. Cancellable contracts provide the insurer with the option to cancel the policy under specific conditions, which might be stipulated within the policy terms. This type of contract allows the insurer to renew the policy, depending on the circumstances, but also gives them the authority to terminate it before its natural expiration.

This flexibility typically works in favor of the insurer, allowing them to reassess risk and manage their portfolio effectively. The ability for the insurer to cancel a policy is important because it reflects the dynamic nature of risk assessment and underwriting as conditions change over time, such as in cases of increasing claims or alterations in policyholder status.

In contrast, other types of policies listed do not carry the same characteristics. Fully underwritten contracts typically involve a more rigorous approval process and are less likely to be canceled by the insurer unless substantial issues arise. Convertible policies allow policyholders to change the type of insurance coverage without additional underwriting, which does not align with the concept of cancellation at the insurer's discretion. Universal life policies are designed to remain in effect as long as premiums are paid, providing more stability and less risk of cancellation by the insurer.