An applicant's health history causes the insurer to assign a table rating to the policy. This means the applicant will:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A table rating is the underwriting method used for substandard risks: the premium is increased above the standard rate, often by a set amount per $1,000 of coverage or by rating tables, to reflect the applicant's higher expected mortality. The applicant is not automatically declined, and the insurer does not silently reduce the benefit. Instead, the insurer offers the coverage at a premium priced to the added risk, and the applicant decides whether to accept the rated offer. The rating is disclosed to the applicant before delivery, and the applicant may accept, decline, or seek coverage elsewhere.
Why the other options are wrong
- B) Table rating is an offer of coverage at a higher premium, not an automatic decline of the application. The amount of the extra premium is based on the degree of the mortality increase.
- C) The policy is issued at the requested amount with an extra premium, not a reduced benefit at the standard cost. Declination is one possible outcome, but table rating is an offer of coverage at an adjusted premium.
- D) A table rating signals an increased risk, which is the opposite of the preferred risk classification. The full face amount is issued at a higher premium rather than a reduced benefit at standard cost.
Memory hook
Table rating = pay more because risk is higher. Substandard is still a sale, just a pricier one.