Underwriting and Policy Issue Flashcards

Which factor is considered a UNFAVORABLE underwriting factor for life insurance applicants?

Answer: Family history of hereditary disease

A family history of hereditary diseases increases mortality risk and is considered an unfavorable underwriting factor.

What is the purpose of a reinsurance arrangement in underwriting?

Answer: To transfer a portion of risk to another insurer

Reinsurance allows an insurer to transfer part of its risk to another company, limiting exposure on large or high-risk policies.

When an insurer issues a policy with a higher premium than applied for, this is called a:

Answer: Substandard rating

A substandard rating results in a higher premium charged to applicants who present greater-than-average risk.

Which document serves as the insurer's formal acceptance of a life insurance application?

Answer: Issued policy

The issued policy represents the insurer's formal acceptance of the application and creates the insurance contract.

What does a 'table rating' indicate about an insurance applicant?

Answer: The applicant poses a higher-than-standard risk requiring a premium surcharge

Table ratings (1-16 or A-P) indicate substandard risks and correspond to premium increases above the standard rate.

An underwriter reviewing an application finds the applicant is a pilot who flies private aircraft. This would most likely result in:

Answer: An aviation exclusion rider

Aviation exclusion riders exclude death resulting from private aviation activity, allowing coverage to be issued without fully rating for the added risk.

What is 'adverse selection' in the context of insurance underwriting?

Answer: The tendency of higher-risk individuals to seek more insurance coverage

Adverse selection occurs when people with higher risk are more likely to purchase insurance, potentially unbalancing the risk pool.