Arkansas Life and Health Insurance Practice Exam

A policy issued as a preferred risk will be issued with a:

1. Higher than standard rate

2. Lower than standard rate

3. Standard rate

4. Variable rate

The correct answer is: Higher than standard rate

A policy issued as a preferred risk will be issued with a higher than standard rate because a preferred risk is an individual who presents a significantly lower risk of loss compared to the average risk. As a result, insurance companies typically offer preferred risks lower premiums as an incentive. Therefore, the correct answer is that a policy issued as a preferred risk will have a higher than standard rate. In comparison, the other options are incorrect: - Option B: Lower than standard rate is incorrect because preferred risks are offered lower premiums, not higher. - Option C: Standard rate is incorrect because preferred risks receive rates lower than the standard. - Option D: Variable rate is incorrect as preferred risks are usually offered a fixed lower rate, not a variable one.