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Question

Difficulty: MediumRisk Classification

An underwriter is reviewing a life insurance application. The applicant has an exceptional medical history and excellent overall health, but is employed full-time as a high-rise structural steel ironworker. Assuming the insurer is willing to accept this occupational hazard, which of the following best describes how the underwriter will classify the risk and adjust the premium?

  1. Approve the policy with a flat extra premium to account for the constant level of occupational risk.Answer
  2. B
    Apply a table rating to the policy so that the premium progressively increases as the applicant ages.
  3. C
    Classify the applicant as a speculative risk and issue the policy only if the face amount is significantly reduced.
  4. D
    Require the applicant to retain the risk by adding a substantial deductible to the policy's death benefit.

Answer

Approve the policy with a flat extra premium to account for the constant level of occupational risk.
The correct answer accurately identifies that hazardous occupations present a constant, non-progressive risk. Underwriters address this by applying a flat extra premium (e.g., 5extraper5 extra per 1,000 of coverage) rather than a table rating, which is reserved for medical conditions where the risk compounds over time.

Step-by-Step Solution

1
Analyze the applicant's risk profile
The applicant has excellent health but a hazardous occupation (structural steel ironworker).
To determine whether the increased risk is medical (increasing with age) or occupational (constant).
2
Evaluate underwriting classification methods for constant hazards
Identify that a flat extra premium is the standard method for constant risks.
Unlike health conditions that worsen over time and require table ratings, the danger of falling from a high-rise remains a constant daily hazard.
3
Select the appropriate premium adjustment
The underwriter will charge a flat extra dollar amount per $1,000 of coverage.
This precisely offsets the specific occupational hazard without penalizing the applicant's excellent baseline health.

Key Concept

Substandard Risk Rating Methods (Flat Extra vs. Tabular)
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Topics

Risk Classification

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