An insured takes up a hazardous avocation, such as skydiving, after the policy was issued. Under a typical life insurance policy, the insurer may:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
When an insured begins a hazardous activity after policy issue, the insurer may attach an exclusion endorsement limiting coverage for that activity, often with a refund of the premium attributable to the excluded coverage. The insurer cannot retroactively void an already issued policy merely because of a newly adopted avocation without a basis in the contract. Endorsements that modify coverage require proper notice, and refunding the unearned premium is a common element of such exclusions. This approach keeps the base coverage intact while removing the newly added high-risk exposure from the insurer's liability.
Why the other options are wrong
- B) Retroactive voiding of the whole policy is not the normal remedy for a newly adopted avocation, because the contract was validly issued. The insurer's recourse is an endorsement, not rescission.
- C) Premiums are not automatically doubled; the insurer adjusts the contract through a hazardous avocation endorsement or an equivalent rating change. A unilateral doubling would violate the contract's terms and would require the insured's consent to take effect.
- D) The insurer offers an endorsement approach rather than unilateral cancellation, preserving coverage for other causes of death. Cancellation of the policy is reserved for genuine policy violations or material misrepresentation, not for engaging in a hazardous hobby alone.
Memory hook
New skydiving hobby? Expect an endorsement excluding the leap, not a silent void.