In underwriting, how is the cost of insuring a substandard risk most commonly adjusted?

• A. Policy length
• B. Premium charges
• C. Coverage amount
• D. Age at issue

Answer: (B)

When a risk is considered substandard, the insurer prices in the higher likelihood of a claim by increasing the premium charged. This premium adjustment directly reflects the extra risk the company is taking on, using methods like rating up or table ratings to show how much more must be paid to insure that person. The other factors—changing how long the policy lasts or how much coverage it provides—aren’t the standard way to price the extra risk, and while age can influence pricing, the core adjustment for substandard risk is the higher premium.