During the life insurance underwriting process, hazard factors are evaluated to assign appropriate rating classifications. Sequence the following individual risk profiles in order from the lowest expected mortality rate (most heavily discounted premium) to the highest expected mortality rate (uninsurable).
- 1An applicant who exercises regularly, maintains an ideal body weight, and has a family history showing exceptional longevity with no cardiovascular disease.
- 2An applicant with average height and weight, well-controlled asthma, and a parent who experienced a heart attack at age 68.
- 3An applicant with poorly controlled type 2 diabetes who frequently participates in amateur auto racing.
- 4An applicant who is currently hospitalized, undergoing active chemotherapy for advanced-stage cancer.
Answer
The correct sequence from lowest to highest mortality risk is: the applicant with ideal health and longevity (Preferred), the applicant with average health and controlled asthma (Standard), the applicant with poorly controlled diabetes and hazardous hobbies (Substandard), and the hospitalized applicant with advanced cancer (Declined).
Life insurance underwriting categorizes applicants into four primary risk classes based on expected mortality. The 'Preferred' class is for those with superior health and yields the lowest premiums. The 'Standard' class covers average risks at normal rates. The 'Substandard' (or rated) class involves higher risks due to health or hobbies, requiring higher premiums. Finally, the 'Declined' class is for risks deemed too hazardous to insure. Ordering the provided profiles follows this exact hierarchy from the most favorable rating to entirely unacceptable.
Step-by-Step Solution
Key Concept
Life Insurance Risk Classification Hierarchy