Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueEasy
A life insurance applicant is 30 years old, has no significant health issues, works a sedentary job, and does not engage in any hazardous hobbies. The underwriter reviews all submitted information and finds no adverse factors. Which risk classification would be assigned?
- ADeclined risk.
- BSubstandard risk.
- CStandard risk.
- DPreferred risk.
Show answer & explanationAnswer & explanation
Correct answer: C. Standard risk.
A standard risk classification is assigned to individuals who, according to the insurer's underwriting guidelines, present an average level of risk. The description of this applicant perfectly fits the criteria for a standard risk, with no preferred or substandard factors.
Why the other options are wrong
- A. Declined risk is for uninsurable applicants, which this applicant clearly is not.
- B. Substandard risk is for individuals with elevated risk factors, which this applicant does not have.
- D. Preferred risk typically requires above-average health and lifestyle, often with specific metrics not mentioned here (e.g., lower-than-average blood pressure/cholesterol).
Standard Risk
An applicant who meets the insurer's average or normal underwriting requirements and is considered to present an average risk of loss.
- Average health and lifestyle.
- Pays standard premiums.
- No significant adverse factors.
Memory trick: Average Joe gets the 'Standard' label, no fuss, no extra charge.