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MTHEL 131 (111)
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Lesson 8

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Mathematics Electives
David Kohler

Lesson 8 Underwriting …cont’d Decisions underwriters could make based on the application: 1. Declined - due to medical condition, etc. 2. Standard (accepted) - regular premiums - is the case 70% of the time 3. Rated policy - cause: applicant poses higher risk than others in the same age group - higher than average premiums - it is up to the applicant whether to accept this offer - is not permanently substandard  ex. if obese person lost weight, premium would lower  ex. if smoker quit, premium would lower * Exclusions to policy are possible, ex. A frequent skydiver will be fully and regularly covered, unless he dies skydiving. Disability Odds of becoming disabled (for at least 3 months) between now and 65 years is 60%. On average, disability lasts 2 years. Types of disability: 1. Due to accident – likelihood decreases as age increases 2. Due to illness- likelihood increases as age increases Actuaries construct: - mortality (death) tables  rates are decreasing - morbidity (disability) tables  rates are increasing Disability Insurance Underwriting * biggest difference between underwriting for disability insurance and life insurance is a person’s occupation Before disability After disability Income Increased expenses Debt Savings Expenses Reduced Income Underwriters ask questions regarding: - medical history - lifestyle/ hobbies - driving record - occupation (changes premium based on risk) Premium amount: Lowest  professional  retail  supervisor  skilled t
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