Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
After underwriting review, an insurer determines an applicant is a substandard risk. Which action best reflects how the insurer may respond?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
For a substandard risk, the insurer may offer the policy with a rated (extra) premium reflecting the higher mortality, add a rider or endorsement excluding or limiting certain causes, or in severe cases decline or postpone the application. Underwriting outcomes range from standard issue to rating to declination based on the degree of risk. The insurer is not required to issue every applicant at preferred rates, and beneficiary exams are irrelevant to the decision.
Why the other options are wrong
- B) Substandard applicants do not receive preferred rates; rating reflects the actual increased risk.
- C) Underwriting evaluates the applicant's risk, not the beneficiary's; beneficiary exams are not part of it.
- D) Issuing a new policy does not cancel the applicant's existing coverage elsewhere.
Memory hook
Substandard risk = rated premium or restricted coverage, or a decline — never a free preferred pass.