Question 1

What is the primary purpose of underwriting in insurance?

Accepted Answer

Underwriting evaluates and selects risks to ensure that applicants are charged a premium commensurate with their level of risk, keeping the insurer financially sound.

Question 2

What does the term 'insurable interest' mean in the context of underwriting?

Accepted Answer

Insurable interest means the policyholder must face a financial loss or hardship if the insured event occurs; it must exist at the time the policy is issued.

Question 3

Which document is the primary source of underwriting information for a life insurance application?

Accepted Answer

The application itself is the primary source; it contains the applicant's personal, medical, and financial information used to assess risk.

Question 4

What is a 'field underwriter' and what role do they play?

Accepted Answer

A field underwriter is the insurance agent who performs the initial risk screening by gathering accurate application information and observing the applicant's apparent health and lifestyle.

Question 5

What is a 'rated' or 'substandard' policy?

Accepted Answer

A rated (substandard) policy is issued to an applicant who presents higher-than-average risk; it typically carries a higher premium or reduced benefits to compensate for the elevated risk.

Underwriting & Risk – Life and Health Insurance License Exam

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