Insurability
The acceptability of an applicant's risk for coverage - the subject of underwriting and the thing guaranteed by no-exam riders and conversion privileges.
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Practice This Concept
A group health plan automatically enrolls every full-time employee and requires no evidence of insurability. Compared with voluntary individual enrollment, this structure tends to reduce adverse selection because:
Healthy employees are brought into the pool along with unhealthy ones, balancing the group's overall risk — Adverse selection concentrates when only high-risk people choose coverage. Automatic, broad enrollment forces healthy and unhealthy employees into the same pool, so the group's risk mix approximates the general population rather than being skewed toward the sick. This risk-distribution effect is why group insurance with mandatory participation is less vulnerable to anti-selection than individually purchased coverage, and why insurers and employers favor wide participation.
National insurance concept
An entrepreneur starts a new medical-device business that could either earn large profits or lose money. From the standpoint of insurability, this venture is:
A speculative risk, generally not insurable because it offers a chance of gain — Because the venture carries both a chance of profit and a chance of loss, it is a speculative risk. Insurers generally do not write speculative risks: the possibility of gain is inconsistent with the fortuitous-loss requirement and would create a moral hazard if profits were insurable. Only the pure-risk elements of the business - property, liability, or business-interruption losses - are typically insurable.
National insurance concept
- General InsuranceA group health plan automatically enrolls every full-time employee and requires no evid…
- General InsuranceAn entrepreneur starts a new medical-device business that could either earn large profi…
- Life InsuranceA key feature of convertible term insurance is that it allows the insured to:
- Life InsuranceAn applicant pays the first premium with the application and receives a conditional rec…
- Life InsuranceA cost-of-living adjustment (COLA) rider on a life insurance policy serves to:
- State RegulationsAn applicant for life insurance is told by an agent that the moment the application is …
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