Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueMedium
A 45-year-old male applies for a life insurance policy. During the underwriting process, his blood pressure is found to be consistently elevated, and he has a family history of early-onset heart disease. He is also a smoker. Which risk classification would the underwriter most likely assign to this applicant?
- AStandard risk.
- BSubstandard risk.
- CDeclined risk.
- DPreferred risk.
Show answer & explanationAnswer & explanation
Correct answer: B. Substandard risk.
A substandard risk classification is assigned to applicants who, due to health issues (elevated blood pressure, family history), lifestyle choices (smoking), or occupation, present a higher than average risk of loss. They are still insurable but will pay higher premiums.
Why the other options are wrong
- A. Standard risk is for individuals with average health and lifestyle, which this applicant exceeds.
- C. Declined risk is for uninsurable applicants; while high risk, these factors don't necessarily make him uninsurable.
- D. Preferred risk is for individuals with excellent health and lifestyle, which this applicant does not meet.
Substandard Risk
An applicant who presents a higher-than-average risk to the insurer due to health, occupation, or lifestyle, but is still considered insurable.
- Higher risk than standard.
- Typically pays higher premiums.
- Common for health issues, hazardous jobs, or hobbies.
Memory trick: Risky applicants get sorted into risk 'bins' by the underwriter's keen eye.