Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
The primary purpose of life insurance underwriting is to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Underwriting evaluates each applicant's risk factors, including age, health, habits, and occupation, so the insurer can accept, rate, or decline the risk. Its central goal is to prevent adverse selection, the tendency of poor risks to seek coverage more actively, and to classify risks into groups such as preferred, standard, and substandard so that premiums reflect expected mortality. Fair classification keeps the product affordable for the insured pool. Underwriting is not about equal premiums, beneficiary health, or commissions.
Why the other options are wrong
- B) Underwriting deliberately differentiates premiums by risk class; charging everyone the same would invite adverse selection.
- C) Underwriting examines the applicant's risk, not the beneficiary's; beneficiary health is irrelevant.
- D) Commissions are a compensation matter, not an underwriting function.
Memory hook
Underwriting = the gatekeeper that sorts good risks from bad so premiums stay fair for all.