In disability income underwriting, which factor generally has the greatest influence on the premium charged?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Occupation is the dominant rating factor in disability income insurance because a person's job directly determines both the likelihood of becoming disabled and the likelihood of staying disabled. Insurers assign applicants to occupational classes, from low-risk professional and clerical classes to high-risk manual, aviation, and hazardous classes, and the class drives the premium. Health, age, gender, and avocations also matter, but occupational class is the anchor of disability rating. Two applicants with identical health can pay very different premiums because of the jobs they hold.
Why the other options are wrong
- B) Hair color has no actuarial connection to disability risk and is not used in rating. Underwriting relies on factors that measurably predict claims, such as occupation, health, age, gender, and avocations.
- C) City of birth is not a disability rating factor. Underwriting evaluates health status, occupation class, age, gender, and avocations; an applicant's birthplace has no predictive value for disability claims.
- D) Marital status is not actuarially predictive of disability claims and is not a disability rating factor. The premium is driven by occupation, health, age, gender, and avocations, not by whether the applicant is married.
Memory hook
Your job title is your disability premium's best friend or worst enemy.