Arizona Health Insurance Practice Exam

The term that describes the process used by insurance companies to evaluate risks before issuing health policies is underwriting. Underwriting involves assessing an individual's health status, medical history, lifestyle choices, and other relevant factors to determine the level of risk they present to the insurer. This crucial step allows the insurance company to make informed decisions regarding coverage eligibility, premium rates, and terms of the policy.

During the underwriting process, if an applicant is deemed to be a higher risk due to various factors, the insurer may charge higher premiums or impose certain exclusions in the policy. Conversely, those considered lower risk may receive more favorable terms. This risk evaluation is essential for maintaining the financial stability of the insurance company and ensuring that policies are offered at a price that reflects the risk involved.

The other options, while related to the insurance process, do not specifically refer to this risk evaluation step. Claim processing involves handling the claims made by policyholders for benefits under their policy. Risk assessment is a broader term that encompasses various methods of evaluating risk but does not specifically denote the formal practice of underwriting. Policy issuance refers to the final step of providing the insurance contract to the policyholder after all necessary evaluations and approvals have been completed.