Life & Health Insurance Underwriting and Risk Classification Flashcards
7 cards from real Life & Health Insurance Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life & Health Insurance Underwriting and Risk Classification flashcards as text
A life insurance applicant discloses a history of Type 2 diabetes diagnosed 5 years ago, well-controlled with oral medication. How would an underwriter most likely classify this risk?
Answer: Substandard risk with a rated premium
Well-controlled Type 2 diabetes typically results in a substandard (rated) classification because it increases mortality risk, though it is usually still insurable.
Which underwriting factor is considered a 'moral hazard' rather than a physical hazard?
Answer: An applicant's intention to defraud the insurer
Moral hazard refers to the risk that an individual's character or dishonest intent may increase the chance of a fraudulent claim.
What is the primary purpose of the Medical Information Bureau (MIB) in life insurance underwriting?
Answer: To share coded medical data among member insurers to detect omissions
The MIB allows member insurers to share coded medical information to identify inconsistencies or omissions in insurance applications.
An underwriter discovers that an applicant for a $2 million life policy has only $60,000 in annual income and no dependents. What concern does this raise?
Answer: There may be an insurable interest problem
A policy face amount grossly disproportionate to income and lack of dependents raises an overinsurance/insurable interest concern, suggesting possible moral hazard.
Which of the following best describes a 'flat extra' premium in life insurance underwriting?
Answer: A fixed dollar amount per $1,000 of coverage added for a specified period
A flat extra is a fixed dollar amount per $1,000 of coverage added to the standard premium, often used for temporary substandard conditions.
An applicant has a family history of Huntington's disease but tests negative for the gene mutation. How should an underwriter treat this information?
Answer: Consider the negative test result favorably, reducing or eliminating the family history concern
A confirmed negative genetic test result for Huntington's disease significantly reduces the hereditary risk, and underwriters generally treat it favorably.
Which of the following is a key difference between 'simplified issue' and 'guaranteed issue' life insurance underwriting?
Answer: Simplified issue uses health questions but no exam; guaranteed issue accepts all applicants regardless of health
Simplified issue requires applicants to answer health questions but skips the medical exam, while guaranteed issue accepts all applicants without any health questions.