What is the standard coverage for a normal risk individual if the premium for a substandard risk is the same?

The standard coverage for a normal risk individual is typically determined by underwriting guidelines and is often based on various factors, including age, health conditions, lifestyle, and claims experience. In this scenario, if the premium for a substandard risk is the same as that for a normal risk, it suggests that the insurer is aware of the higher risk associated with the substandard individual but is maintaining a consistent rate structure for simplicity or for competitive reasons.

The choice of $20,000 likely reflects a balance that insurers commonly set for life insurance coverage limits for individuals with standard health profiles. This amount is considered reasonable for a wide range of applicants and promotes accessibility to coverage without overstepping typical underwriting limits for normal risk.

Additionally, the options provided may illustrate common coverage amounts that insurance policies often feature. The selection of $20,000 as the standard coverage aligns with expectations for entry-level or basic life insurance products commonly offered in the market, geared towards individuals with good health standing. Thus, the reasoning behind selecting this figure lies in its commonality as a coverage amount in typical insurance policies while ensuring affordability and accessibility for a broader audience.