Rhode Island Life Insurance Practice Exam

What may occur if an underwriter reclassifies a life insurance applicant due to health concerns?

1. This policy will be canceled

2. An additional premium may be charged

3. The coverage amount will be reduced

4. No change will occur

The correct answer is: An additional premium may be charged

When an underwriter reclassifies a life insurance applicant due to health concerns, an additional premium may be charged as a result of the new risk assessment. This reclassification indicates that the applicant poses a higher risk to the insurance company due to their health status, which often translates into a higher premium. This adjustment helps the insurer cover the potential increased liability they are taking on by insuring that individual. It's important to understand that a reclassification does not automatically mean the policy is canceled, as the insurer will typically still offer coverage but at a different cost that reflects the assessed risks. Additionally, the coverage amount usually remains intact unless specifically adjusted by the insurer for other reasons, although in some cases, a lower maximum might apply. Finally, some applicants might see no change if they are classified within a standard risk category despite health concerns, but this would not apply if the underwriter has determined that a higher risk level is present.