Page 7 - Life Insurance underwriting Ebook IC 22

a) The type of risk: increasing. decreasing or constant
b) the purpose for which the insurance cover is sought

c) the degree or extent of severity of the risk

4.2 Accept the proposal with special or altered terms

a) Charge extra premium for the extra risk
 In this method, an insurance company charges extra premium over

the standard rate for accepting the risk. The decision to charge extra
premium over the entire policy term or for a short term period
depends upon the type of risk associated with the individual.

 For increasing extra risk
 For constant extra risk

 For decreasing extra risk
b) Diminishing lien

i. In this method of acceptance a reduced basic sum-assured is paid. If
death occurs during lien period. In other words, a debt is created as a

pre-determined amount if death were to occur within a stipulated
period.

ii. The amount of debt is maximum at the time of commencement of
the policy and it gradually decreases by a certain amount with each

passing year and the debt gets fully cancelled after a certain pre-
determined period, which is specified in the schedule of the policy.
iii. However, when the debt is operative:

 The bonuses are paid in full under a "with-profits" policy and not on
the diminished sum-assured.

 If death happens due to accident no lien is applied and the claim is
paid on the full base sum-assured basis.

iv. This method of diminishing lien is currently not used in India as it is
felt that it defeats the yen purpose of full insurance cover, if death

were to occur in the first few years from commencement. Mille the

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