California Life and Health Insurance Practice Exam 2025 – Complete Test Prep

Question: 1 / 400

What does the term "underwriting" refer to in insurance?

The process of enrolling new policyholders

The evaluation of risk to determine the terms of coverage

The term "underwriting" in insurance refers to the evaluation of risk to determine the terms of coverage. This essential process involves analyzing various factors such as an individual's health history, lifestyle, and other relevant information to assess the potential risk associated with providing insurance coverage. The underwriter determines whether to accept or decline the application and on what terms, including premiums, exclusions, and coverage limits.

This role is crucial because it helps insurance companies balance risk and ensures that they can maintain profitability while providing coverage to policyholders. Effective underwriting leads to fair pricing of insurance products based on the actual risk each applicant presents, ultimately benefiting both the insurer and the insured by establishing reasonable terms of coverage aligned with the assessed risk.

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The process of marketing insurance products

The assessment of customer service quality

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