Which of the following is NOT a possible result of underwriting an individual disability income application?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Underwriting evaluates risk and produces a limited set of outcomes: standard acceptance, substandard (rated) acceptance with a higher premium or reduced benefits, acceptance with an exclusion or limitation rider, deferral pending more information, or declination. Automatic acceptance of every applicant regardless of risk would defeat the purpose of underwriting, which is risk classification and protection against adverse selection, and it is not an outcome of the individual underwriting process. The other three options are all recognized dispositions of an application, used routinely depending on the applicant's risk profile.
Why the other options are wrong
- B) Standard acceptance at the normal premium is a routine outcome when an applicant presents average risk and no significant impairments. It is a recognized disposition, so it is a possible underwriting result.
- C) Acceptance with a higher premium, known as a substandard or rated policy, is a common way to insure an applicant whose health, occupation, or avocations raise the probability of loss. It is a recognized underwriting outcome.
- D) An exclusion or limitation rider lets the insurer accept the risk while carving out a specific condition or activity. This is a standard tool in disability underwriting, so it is a possible result.
Memory hook
Underwriting outcomes: accept, rate, exclude, defer, decline — never auto-accept everyone.