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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part I)

Rohan, aged 52 and a heavy smoker with high blood pressure, applies to a life insurer for a term plan at standard rates. The underwriter accepts him but charges an extra premium reflecting his higher mortality risk. What is this type of underwriting decision called?

This is a rated-up or substandard acceptance. The insurer agrees to cover the higher-than-average life but charges an extra premium to reflect the added mortality risk. Standard acceptance would carry no loading, while declinature or postponement would mean cover is refused or delayed.

  1. AStandard acceptance at ordinary rates
  2. BRated-up (substandard) acceptance with extra premiumCorrect
  3. COutright declinature
  4. DPostponement of the proposal

Explanation

When a life is worse than average but still insurable, the insurer accepts it with an extra premium or loading, known as rating up or substandard acceptance. Standard acceptance would mean no extra charge. Declinature or postponement would mean no cover is offered now.

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