Life insurance companies often give applicants a physical examination to prevent

Question

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Life insurance companies often give applicants a physical examination to prevent adverse selection. Adverse selection occurs when individuals who are of higher risk are the ones who are most likely to take out insurance policies. By giving a physical examination, life insurance companies can identify any pre-existing conditions or health risks that may indicate a higher likelihood of the individual needing to use the policy. This allows them to adjust the policy premium or deny coverage altogether, thus reducing the potential for adverse selection.

Life Insurance Companies Often Give Applicants a Physical Examination to Prevent