Define “impaired risk” in the life insurance context.

Define “impaired risk” in the life insurance context.

• A. An individual seeking insurance without a medical examination
• B. An individual with health issues that may require higher premiums or special underwriting
• C. An individual who is considered a lower risk due to lifestyle choices
• D. An individual who is denied insurance coverage

Answer: (B)

In the life insurance context, "impaired risk" refers to an individual who has existing health issues or medical conditions that make them a higher risk to the insurer. Because of these health concerns, such individuals may require higher premiums or undergo a more stringent underwriting process to assess their eligibility for coverage. This is essential for insurers as it allows them to account for the increased probability of claims resulting from the applicant's health condition. The designation of impaired risk acknowledges that not all applicants pose the same level of risk. Insurers utilize this classification to balance their portfolios, ensuring that premiums collected adequately cover the lower life expectancies or higher mortality risks associated with specific health issues. Through appropriate underwriting practices, insurers can tailor the coverage terms to better align with the degree of risk presented by these individuals.

In the life insurance context, "impaired risk" refers to an individual who has existing health issues or medical conditions that make them a higher risk to the insurer. Because of these health concerns, such individuals may require higher premiums or undergo a more stringent underwriting process to assess their eligibility for coverage. This is essential for insurers as it allows them to account for the increased probability of claims resulting from the applicant's health condition.

The designation of impaired risk acknowledges that not all applicants pose the same level of risk. Insurers utilize this classification to balance their portfolios, ensuring that premiums collected adequately cover the lower life expectancies or higher mortality risks associated with specific health issues. Through appropriate underwriting practices, insurers can tailor the coverage terms to better align with the degree of risk presented by these individuals.