California Life-Only & Accident and Health AgentLife InsuranceMedium
A life insurance applicant has a history of a serious medical condition that is currently well-managed with medication. The underwriting process reveals this condition, but the insurer determines that the risk is higher than average but still acceptable. How will the insurer likely classify this applicant?
- ADeclined Risk
- BStandard Risk
- CSubstandard Risk
- DPreferred Risk
Show answer & explanationAnswer & explanation
Correct answer: C. Substandard Risk
A substandard risk classification is assigned when an applicant presents a higher-than-average risk due to health conditions, occupation, or lifestyle, but the risk is still insurable, typically with a higher premium.
Why the other options are wrong
- A. Declined risk means the applicant's risk is too high or uninsurable for the insurer.
- B. Standard risk is for individuals with average health and lifestyle, meeting the insurer's typical criteria.
- D. Preferred risk is for individuals with excellent health and lifestyle, lower than average risk.
Substandard Risk
An applicant for life insurance who presents a higher-than-average risk to the insurer due to health conditions, occupation, or lifestyle, but is still considered insurable, typically with a higher premium or modified policy.
- Higher than average risk
- Still insurable
- Usually results in higher premiums or specific exclusions
Memory trick: Preferred is green, Standard is yellow, Substandard is orange, Declined is red.