When issuing disability income coverage on a substandard risk, what might an insurance company do?

When an insurance company issues disability income coverage to a substandard risk, they often take measures to mitigate the increased risk associated with that individual. One common approach is to shorten the benefit period. This means that the insurance company limits the length of time for which benefits will be paid if the insured becomes disabled.

Substandard risks are individuals who may have health issues, occupational hazards, or behaviors that make them more likely to file a claim on their policy. By shortening the benefit period, the insurer reduces the potential liability, as they are not responsible for paying benefits for as long a duration as they would for someone deemed a standard risk. This helps the company manage its risk exposure while still providing some level of coverage to the insured, balancing protection for the individual with the insurer's need to maintain financial stability.

Increasing the benefit amount, eliminating the waiting period, or raising the premium amount could also be potential adjustments in response to a substandard risk; however, shortening the benefit period is a more direct way to address the heightened chance of claims in this scenario.