South Carolina Personal Lines Practice Exam

What is the primary goal of Underwriting in insurance?

1. To give insurance to everyone

2. To select risks and determine coverage eligibility

3. To increase the number of policies issued

4. To manage claims after an incident

The correct answer is: To select risks and determine coverage eligibility

The primary goal of underwriting in insurance is to select risks and determine their eligibility for coverage. This process involves assessing the potential risks associated with an applicant and deciding whether to provide coverage, as well as at what premium and under what terms. Underwriters analyze information such as an applicant's health, driving record, property characteristics, or business practices to make informed decisions about risk. By accurately evaluating these factors, underwriters help insurers avoid excessive risk, thereby maintaining the financial stability of the insurance company while ensuring that those who qualify get the coverage they need. This careful selection process also helps in creating insurance policies that are fair and tailored to the risks presented, balancing the interests of both the insurer and the insured.