What type of letter is sent when an insured fails to report a claim in a reasonable amount of time?

The correct choice is the Reservation of Rights letter. This type of letter is used by an insurer when a claim has been reported, but the insured has failed to do so in a timely manner. In such cases, the insurer may express its intent to investigate the claim further while also informing the insured that coverage may be affected due to the delay in reporting.

This letter serves a vital purpose as it protects the insurer's rights and allows them to maintain their position in case they determine that the delay impacts their obligation to pay the claim. It essentially reserves the insurer's rights to deny coverage if the late reporting affects their ability to investigate or respond appropriately to the claim.

Understanding this context is crucial, as it highlights the importance of timely reporting and how it can impact coverage. It also clarifies the insurer's responsibilities and rights under the policy, emphasizing the need for both parties to communicate effectively and promptly regarding claims.