Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueMedium
A life insurance applicant has a hazardous hobby, such as skydiving, which the underwriter deems poses an additional risk. Rather than declining the policy entirely, the insurer agrees to issue the policy but with a specific provision limiting coverage for death resulting directly from skydiving. This provision is known as a(n):
- AExclusion Rider
- BGuaranteed Insurability Option
- CElimination Period
- DWaiver of Premium
Show answer & explanationAnswer & explanation
Correct answer: A. Exclusion Rider
An exclusion rider is an attachment to a policy that eliminates coverage for specific risks, such as death resulting from a hazardous hobby like skydiving. This allows the insurer to issue a policy while managing specific high-risk exposures.
Why the other options are wrong
- B. Guaranteed Insurability Option allows the insured to purchase additional coverage without evidence of insurability at specified future dates.
- C. An elimination period is a waiting period before benefits begin, typically in disability insurance.
- D. Waiver of Premium is a rider that waives premium payments if the insured becomes totally disabled.
Exclusion Rider
An endorsement added to an insurance policy that specifies that certain conditions, activities, or causes of loss are not covered.
- Eliminates coverage for specific risks
- Allows policy issuance for otherwise high-risk applicants
- Common for hazardous occupations or hobbies
Memory trick: Underwriting Modifications: Rate, Postpone, or EXCLUDE the hazard.