Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

The term for the action taken when an insurer offers a policy for less than the requested amount is identified as a counteroffer. This situation arises during the negotiation process of an insurance policy, where the applicant submits an offer (request for coverage) and the insurer responds with an alternative proposal that typically includes modified terms, such as a lower coverage amount or premium.

A counteroffer indicates that the insurer does not accept the original terms proposed by the applicant but seeks to negotiate further. This interaction is an essential part of the underwriting process, reflecting the insurer’s assessment of risk and ensuring that both parties have a clear understanding of the terms of the insurance contract.

In contrast, acceptance signifies that the insurer agrees fully to the terms as proposed, while rejection means that the insurer declines to issue the policy altogether. An amendment refers to changes made to an existing policy rather than a negotiation at the initial offer stage. Understanding these distinctions is vital in the context of insurance agreements and their negotiation processes.