What action may an insurance company take when issuing disability income coverage on a substandard risk?

When issuing disability income coverage on a substandard risk, it is possible for an insurance company to shorten the benefit period. This action is taken because individuals classified as substandard risks typically present higher chances of making a claim due to their health status or other risk factors. By shortening the benefit period, the insurer effectively reduces its exposure and potential liability, as it limits the duration for which benefits are paid. This measure allows them to provide coverage while managing the risk associated with insuring individuals who pose a higher likelihood of disability.

In contrast, options such as significantly increasing the premium could be a risk management strategy, but they do not directly address the need for coverage adjustment for substandard risks specifically; insurers may look to maintain a competitive rate. Eliminating the waiting period would increase the insurer's exposure, which is counterproductive in the case of a substandard risk. Providing additional benefits could further increase the insurer's liability, which is not typically aligned with managing coverage for a higher-risk individual.