Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueMedium
A life insurance applicant discloses a history of participating in high-altitude mountaineering. The underwriter determines that this activity presents a higher level of risk than standard. Which of the following actions is the underwriter most likely to take?
- AIncrease the policy's cash value accumulation rate to offset the risk.
- BIssue the policy with an exclusion rider for mountaineering-related deaths.
- CIssue the policy as applied for, without any modifications.
- DDecline the application due to uninsurable risk.
Show answer & explanationAnswer & explanation
Correct answer: B. Issue the policy with an exclusion rider for mountaineering-related deaths.
For hazardous hobbies, insurers often issue policies with exclusion riders, which state that the policy will not pay out if death or injury results from the specified activity. This allows the insurer to cover the applicant for other risks while avoiding the specific high-risk activity.
Why the other options are wrong
- A. Cash value is unrelated to managing underwriting risk of a hazardous hobby.
- C. Issuing as applied for would be unlikely given the disclosed high risk.
- D. Declining is possible but often a last resort; mitigation is preferred.
Exclusion Rider
An attachment to an insurance policy that eliminates coverage for specific risks, conditions, or causes of loss.
- Removes certain perils from coverage.
- Common for hazardous hobbies or pre-existing conditions.
- Allows policy issuance when risk is otherwise too high.
Memory trick: When risks are high, underwriters wave a 'No-Go' flag for specific dangers.