Which would be a valid reason why a policy premium would be higher than the standard premium?

• A. The insured and applicant have excellent health
• B. The insured does not meet established underwriting requirements
• C. The insured is under 25
• D. The policy is renewable annually

Answer: (B)

Underwriting and risk classification determine why a premium might be higher than standard. If the insured does not meet underwriting requirements, the insurer can’t price the policy at the standard rate and may assign a substandard rating or a “rated up” premium to reflect higher risk. That higher premium compensates for health or risk concerns the insurer hasn’t accepted at standard risk levels. In contrast, excellent health would typically qualify for preferred or standard rates, being under 25 usually corresponds with lower premiums, and a policy’s annual renewal structure doesn’t by itself create a higher rate at issue—it may influence costs later as age changes, but the reason for a higher premium here is the underwriting risk.