An insurance policy may be issued with a preferred insurance premium in all of these situations EXCEPT

• A. good credit history
• B. living in a rural area
• C. good health history
• D. being a nonsmoker

Answer: (B)

Underwriting looks at factors that correlate with lower risk to the insurer. A preferred premium is given when the insured is deemed to present the lowest risk. Good credit history suggests financial responsibility and correlates with lower claim risk over time. A good health history means fewer medical issues and lower expected medical costs, which supports a better rating. Being a nonsmoker reduces health risks and is a classic driver for more favorable pricing. Living in a rural area, however, isn’t a standard indicator of lower risk for most policies; it doesn’t reliably signal fewer claims and can even raise certain risks due to access to care or emergency services. So, living in a rural area is the exception to receiving a preferred premium.