Question

How can an individual's financial condition impact life insurance underwriting?

a.

It has no impact on life insurance underwriting

b.

It can result in a lower premium for the individual

c.

It can result in a higher premium for the individual

d.

It can result in the proposal being declined or accepted with modified terms

Posted under IC22 Life Insurance Underwriting

Answer: (d).It can result in the proposal being declined or accepted with modified terms Explanation:An individual's financial condition can impact life insurance underwriting in many ways, and it can even result in the proposal being declined or accepted with modified terms. For example, if an individual has a poor financial record, is continuously in debt, and their expenses consistently exceed their income and assets, the underwriter may reject the proposal for insurance cover or even recommend a reduction in the quantum of cover that can be granted. This is because the individual may not be able to pay the premiums for the selected tenure/term of the policy, which may tantamount to over-insurance, invoking an element of moral hazard. On the other hand, if the individual has a good financial record, it can result in a lower premium or a better policy offer.

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