South Carolina Life Insurance Practice Exam

What type of insurance typically requires an insurability assessment before policy issuance?

1. Term Insurance

2. Adjustable Life Insurance

3. Group Insurance

4. Universal Life Insurance

The correct answer is: Adjustable Life Insurance

The correct choice is that adjustable life insurance typically requires an insurability assessment before policy issuance. This type of policy combines elements of both term and permanent insurance, allowing policyholders the flexibility to adjust premium payments and the death benefit. Because of this adjustable nature, insurers need to evaluate the applicant’s health and risk profile to determine eligibility and premium rates. An insurability assessment assesses factors such as the applicant's medical history, age, lifestyle, and possibly occupation, which are crucial in calculating the risk for the insurance company. This comprehensive evaluation ensures that the insurer can adequately price the policy and offer terms that reflect the applicant's unique circumstances. While other types of insurance, like term and universal life, may also involve insurability assessments, adjustable life specifically requires this step due to its flexible nature and the need for the insurer to accurately gauge risk associated with the possible adjustments to coverage. Group insurance, on the other hand, often does not require such individual assessments since it covers a group of people under a single policy, relying instead on group demographics to manage risk.