South Carolina Life Insurance Practice Exam

When increasing the amount of insurance in an adjustable life policy, what does the insurer require from the insured?

1. A new medical exam

2. Limited Pay Whole Life

3. Proof of income

4. Reassessing the policy's terms

The correct answer is: A new medical exam

When increasing the amount of insurance in an adjustable life policy, the insurer typically requires a new medical exam. This requirement is in place because the insurer needs to evaluate the current health status of the insured. Insurers assess risk when underwriting policies, and a change in the level of coverage necessitates a fresh assessment to ensure that the new, higher amount of insurance can be responsibly underwritten based on the insured's health status. Determining the amount of coverage involves a careful analysis of potential risks associated with the insured's health. As an insured person's health can change over time, especially if there are significant gaps between the original application and the proposed increase, a medical exam provides updated and relevant information to underwriters. The other choices present considerations that are not applicable in the context of increasing coverage. Limited Pay Whole Life is a type of policy structure and does not relate to requirements for increasing coverage. Proof of income may be relevant in other financial contexts but typically is less important than health status in underwriting life insurance. Likewise, reassessing the policy's terms refers more to reviewing existing provisions rather than fulfilling specific underwriting requirements for a coverage increase.