FSI Credit Insurance Practice Test

Which would be a valid reason for a policy premium to be higher than standard?

Insured does not meet established underwriting requirements Insured has excellent medical history Insured is in perfect health The policy is short-term but with high coverage

Correct Answer:

Insured does not meet established underwriting requirements

Explanation:

Underwriting sets premiums based on the risk the insurer takes on. When the insured does not meet established underwriting requirements, they’re treated as a substandard risk. That higher risk means the insurer raises the premium above the standard rate to compensate for the greater chance of a claim or the need for special terms. The other scenarios describe lower risk or different pricing factors that don’t inherently require a higher-than-standard premium: excellent or perfect health signals lower risk and would typically earn standard or preferred rates, while a short-term policy with high coverage affects pricing in a different way and doesn’t automatically justify a higher premium solely on that basis.

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