California Life-Only & Accident and Health AgentLife InsuranceEasy
A life insurance applicant has a history of a serious medical condition that is currently well-managed with medication. The underwriter determines that while the risk is higher than average, it is still insurable. How would this applicant likely be classified?
- AStandard Risk
- BPreferred Risk
- CDeclined Risk
- DSubstandard Risk
Show answer & explanationAnswer & explanation
Correct answer: D. Substandard Risk
A Substandard Risk classification is applied to applicants who pose a higher-than-average risk to the insurer due to health issues, hazardous occupations, or avocations, but are still considered insurable, usually with higher premiums.
Why the other options are wrong
- A. Standard Risk applies to individuals with average health and lifestyle, fitting the insurer's normal mortality expectations.
- B. Preferred Risk is for individuals with excellent health and lifestyle, qualifying for lower premiums than standard risks.
- C. Declined Risk means the applicant is uninsurable due to extremely high risk, which is not indicated here as the condition is 'well-managed'.
Substandard Risk
An applicant classification in life insurance for individuals who present a higher-than-average risk of mortality to the insurer due to health, occupation, or lifestyle factors, but are still deemed insurable.
- Higher risk than average.
- Still considered insurable.
- Typically requires higher premiums (rated policy).
- May involve policy modifications or exclusions.
Memory trick: Risk classifications: Preferred, Standard, Substandard, Declined.