California Life-Only & Accident and Health AgentAccident and Health InsuranceHard
A client is applying for a new individual health insurance policy. During the underwriting process, the insurer discovers that the client has a pre-existing heart condition that was not disclosed on the application. The insurer decides to issue the policy but with a higher premium and an exclusion rider for any claims related to the heart condition. What is this underwriting decision known as?
- AStandard Risk
- BPreferred Risk
- CPolicy Declined
- DSubstandard Risk with Rider
Show answer & explanationAnswer & explanation
Correct answer: D. Substandard Risk with Rider
When an insurer identifies a higher-than-average risk (substandard risk) due to a pre-existing condition, they may issue the policy but with modifications such as a higher premium (rated up) and an exclusion rider to eliminate coverage for that specific condition.
Why the other options are wrong
- A. Standard Risk means the applicant is accepted at standard rates without modifications.
- B. Preferred Risk means the applicant is exceptionally healthy and qualifies for lower premiums.
- C. Policy Declined means the insurer refuses to issue the policy at all.
Substandard Risk (Health Insurance)
An applicant for health insurance who presents a higher-than-average risk to the insurer due to health history, occupation, or other factors. The insurer may issue the policy with modifications such as higher premiums (rated up) or exclusion riders.
- Higher risk than average.
- May result in higher premiums (rated up).
- May include exclusion riders for specific conditions.
Memory trick: PREFerred STANDARD, SUBSTANDARD DECLINED.