Which statement best describes preferred risks?

Which statement best describes preferred risks?

• A. They have higher premiums due to better coverage
• B. They qualify for lower premiums due to ideal health, height, and weight and tend to have longer life expectancy
• C. They pay the same premium as standard risks
• D. They are eligible only for limited coverage

Answer: (B)

In life insurance underwriting, risk classifications determine how much premium you pay. Preferred risks are the lowest risk category, meaning the insurer expects the claimant to have the smallest chance of dying during the policy term. Because of this, premiums are lower. People in this group typically have ideal health, normal height and weight, and a longer life expectancy, which all signal lower overall risk to the insurer. Since their probability of a claim is reduced, the rate offered is more favorable than for standard or higher-risk applicants. The other statements don’t fit because higher premiums aren’t charged to preferred risks; they generally receive lower premiums. They aren’t limited to limited coverage, and they aren’t priced the same as standard risks.

In life insurance underwriting, risk classifications determine how much premium you pay. Preferred risks are the lowest risk category, meaning the insurer expects the claimant to have the smallest chance of dying during the policy term. Because of this, premiums are lower. People in this group typically have ideal health, normal height and weight, and a longer life expectancy, which all signal lower overall risk to the insurer. Since their probability of a claim is reduced, the rate offered is more favorable than for standard or higher-risk applicants.

The other statements don’t fit because higher premiums aren’t charged to preferred risks; they generally receive lower premiums. They aren’t limited to limited coverage, and they aren’t priced the same as standard risks.