Connecticut Life Producer Practice exam

What does a substandard risk policy usually come with?

1. Higher premiums than standard policies

2. Lower benefits than standard policies

3. No coverage for pre-existing conditions

4. Guaranteed premiums for life

The correct answer is: Higher premiums than standard policies

A substandard risk policy typically comes with higher premiums than standard policies. This is because substandard risk refers to individuals who do not meet the usual underwriting criteria for a standard life insurance policy due to factors such as poor health, a risky occupation, or hobbies that increase risk. Insurers assess that these individuals are more likely to file claims, which is why they charge higher premiums to offset the increased risk of insuring them. The other options do not accurately reflect the nature of substandard risk policies. For instance, while some policies may have limitations regarding pre-existing conditions, this is not a universal characteristic of all substandard risk policies. Similarly, substandard policies do not inherently offer lower benefits than standard ones; the benefit amounts can be similar, but they are often offered at a higher cost. Guaranteed premiums for life are typically associated with whole life policies or similar products and do not specifically apply to substandard risk policies.