Life & Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The correct choice highlights that a health hazard increases the frequency or severity of loss in life insurance. This relationship is fundamental in understanding how insurers assess risk. A health hazard refers to any condition that increases the chance of a policyholder experiencing a significant health issue, leading to a potential claim against the life insurance policy.

When individuals present health hazards, they are seen as higher risks to insurers. This can manifest in various ways, including a greater likelihood of premature death or serious illness. Insurers statistically analyze these risks and establish their policies based on the expected losses they anticipate from those risks. Therefore, the more pronounced the health hazard, the higher the insurer expects the frequency or severity of loss, which directly impacts their reserving and pricing strategies.

The other options, while relevant to the broader discussion of insurance, do not specifically address what happens in relation to a health hazard. For instance, while the cost of premiums may be affected, the connection is indirect and contingent on the broader implications of increased risk rather than directly stating the relationship of health hazards with loss events. Similarly, policyholder engagement and the underwriting process are influenced by comprehensive risk assessments, but they do not directly correlate with the concept of a health hazard in the same way that loss frequency and severity