21. An applicant for an individual disability income policy has a chronic back condition. As an alternative to declining the risk, the insurer may issue the policy and
Answer: C
The insurer may issue the policy and utilize an impairment rider.
An insurer may choose to issue a policy to an applicant with a chronic back condition by incorporating an impairment rider. This rider allows the insurer to limit coverage specifically related to the pre-existing condition while still providing benefits for other disabilities that may occur.
A) exclude all accident-related injuries.
Excluding all accident-related injuries would be a broad limitation that does not specifically address the chronic back condition of the applicant. This option does not align with the practice of issuing a policy, as it would likely leave the applicant without coverage for many potential claims, which is not a common approach for insurers dealing with chronic conditions.
B) reduce the premium.
Reducing the premium does not directly address the chronic back condition or the associated risks. While it may seem beneficial to the applicant, it could result in inadequate coverage or insufficient risk management on the part of the insurer. Therefore, this option does not effectively accommodate the applicant's specific health situation.
C) utilize an impairment rider.
Utilizing an impairment rider allows the insurer to provide coverage while specifically excluding benefits related to the applicant's chronic back condition. This approach is a practical solution that permits the applicant to obtain insurance while managing the insurer's risk associated with pre-existing conditions.
D) cover only work-related losses.
Covering only work-related losses would limit the scope of the policy and may not provide comprehensive coverage for the applicant's needs. This option does not adequately address the chronic nature of the back condition or provide a balanced risk assessment, making it less favorable compared to using an impairment rider.
Conclusion
The utilization of an impairment rider effectively addresses the insurer's need to manage risk while still allowing the applicant to secure coverage. Unlike the other options, which either impose excessive limitations or fail to adequately address the specific condition, the impairment rider strikes a balance between coverage and risk management, making it the most appropriate choice for the situation presented.