California Life-Only & Accident and Health AgentLife InsuranceMedium
A life insurance applicant is currently undergoing treatment for a serious illness. The underwriter reviews the application and medical records. Which of the following risk classifications is MOST likely to be assigned to this applicant?
- AStandard
- BDeclined
- CPreferred
- DSubstandard
Show answer & explanationAnswer & explanation
Correct answer: D. Substandard
An applicant undergoing treatment for a serious illness would present a higher risk than average. Therefore, they would likely be classified as 'Substandard' risk, meaning they are insurable but at a higher premium rate to compensate for the increased risk.
Why the other options are wrong
- A. Standard risk applies to individuals who meet the insurer's average health criteria.
- B. Declined means the applicant is considered uninsurable by the insurer due to extremely high risk or specific reasons.
- C. Preferred risk applies to individuals with excellent health and lifestyle, lower than average risk.
Substandard Risk
An insurance applicant who presents a higher-than-average risk to the insurer due to health, occupation, or lifestyle.
- Still considered insurable.
- Assigned a higher premium rate.
- May have policy modified with riders or exclusions.
Memory trick: Pristine, Standard, Substandard, Declined: the underwriting line.