Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The primary purpose of life insurance underwriting is to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Underwriting exists to keep the insured pool balanced: applicants who know they are poor risks tend to seek coverage more eagerly, which is adverse selection. By evaluating each applicant's risk and assigning a class such as preferred, standard, or substandard, the insurer ensures that premiums correspond to expected mortality and that standard risks are not overcharged to subsidize poor risks. Accurate classification protects the fairness and solvency of the entire risk pool and allows the insurer to price coverage correctly.
Why the other options are wrong
- B) Rejection is not the goal of underwriting; the insurer wants to accept insurable risks at appropriate rates. Proper risk classification keeps the premium structure fair and the insurer financially sound.
- C) Mortality tables remain essential to pricing; underwriting assigns individual applicants within the table's expectations. Underwriting aims to accept the largest group of insurable risks at rates that accurately match each risk.
- D) Underwriting may decline, rate up, or add exclusions; there is no guarantee of acceptance at standard rates. Mortality tables remain the foundation of life insurance pricing and reserve calculations.
Memory hook
Underwriting sorts the pool so the sick do not quietly load the healthy. Classify right, price right.