Arizona Life and Health Practice Exam

Which of the following factors can affect the premium of a disability income insurance policy?

1. Claim history

2. Age and health status

3. Job duties

4. All of the above

The correct answer is: All of the above

The premium of a disability income insurance policy can be influenced by various factors that collectively assess the risk involved in insuring an individual. Each of the listed factors plays a significant role. Claim history is an important determinant; if an applicant has a history of frequent claims, it indicates a higher likelihood of future claims, which results in higher premiums. Insurers look at this history to understand the risk profile of the applicant. Age and health status are also critical, as younger applicants generally pose a lower risk due to potentially fewer health issues, leading to lower premiums. Conversely, older individuals or those with pre-existing health conditions might face higher premiums, reflecting their increased likelihood of disabilities. Job duties matter significantly as well. Occupations that involve greater physical risks or higher chances of injury will typically result in higher premiums. For example, a construction worker might pay more than an office worker due to the higher risk associated with their job. Each of these factors contributes to the overall risk assessment that insurers conduct when determining premium rates. Since they all influence the cost of premiums, the correct answer incorporates all of them, highlighting the comprehensive nature of risk assessment in disability income insurance policies.