Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An applicant applies for life insurance at standard rates, but the underwriter approves the policy only at a higher substandard premium because of a health condition. If the applicant does not accept the higher rate, what happens?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
When an insurer offers coverage at a different premium than applied for, that is a counteroffer. If the applicant does not accept it, there is no contract and no policy is issued. The application and premium are returned. The insurer cannot force coverage on the applicant, and the applicant cannot force standard coverage the insurer is unwilling to provide.
Why the other options are wrong
- B) The insurer is not required to issue at the standard rate when underwriting finds an increased risk.
- C) There is no automatic 30-day temporary coverage when the applicant rejects the counteroffer.
- D) Premiums are refunded, but the applicant may reapply or pursue other options; the matter is not a dead end with no rights.
Memory hook
A rated offer is a counteroffer. No acceptance, no contract, no coverage - and a premium refund on the way out.