After reviewing a disability income application, the insurer may take all of the following actions EXCEPT:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Disability income underwriting outcomes include approval at standard rates, approval with an extra premium or benefit restriction for substandard risks, declination when the risk exceeds acceptable limits, and postponement when more information is needed. These decisions flow from the underwriting purpose of preventing adverse selection. Issuing coverage to every applicant without evaluating health, occupation, or other risk factors would abandon underwriting entirely, invite adverse selection, and destabilize the premium structure for the entire block of insureds.
Why the other options are wrong
- A) Rating up a substandard risk is a standard underwriting outcome that makes coverage available at a price reflecting the added risk.
- B) Declination for an unacceptable occupational hazard is a permitted underwriting decision.
- D) Postponement while medical information is gathered is a recognized underwriting option and protects both insurer and applicant.
Memory hook
Underwriters can approve, rate, decline, or postpone. Blanket approval for everyone is not on the menu.