Certified Financial Consultant (CFC) Practice Exam

If an applicant has an existing condition, how might that affect their ability to secure a life insurance policy?

1. It will not affect their eligibility at all

2. They might be offered a higher premium

3. They will automatically be denied

4. They will receive a refund on their premium

The correct answer is: They might be offered a higher premium

When an applicant has an existing condition, it typically leads to a more thorough evaluation of their health status by life insurance underwriters. Due to the increased risk associated with pre-existing medical conditions, insurers often respond by adjusting the terms of coverage. Offering a higher premium is common as it reflects the additional risk the insurer is taking on. This adjustment ensures that the insurance company can compensate for the likelihood of a claim being made due to the applicant's health condition. In contrast, not affecting eligibility at all is generally unrealistic in the context of existing health issues, as insurers assess risk carefully to protect their financial interests. Automatic denials may occur in certain high-risk situations but are not universally applied to all applicants with conditions. Additionally, offering a refund on premiums would be incompatible with standard policy practices, as premiums are charged based on risk assessment and coverage terms agreed upon at the start of the policy. Therefore, adjusting the premium to account for existing conditions accurately reflects industry norms.