Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Life Insurance Glossary & Terms and other Life Insurance topics.
Adverse selection occurs when a proposed insured who is already critically ill applies for life insurance. This is considered adverse selection because it increases the risk to the insurer. It can also create an inadequacy in the rate structure because the insurance company is charging a rate for a healthy person with lower risk.