What action might an insurer take if they discover that an applicant has a significant undisclosed medical condition?

If an insurer discovers that an applicant has a significant undisclosed medical condition, they may decline the application due to the heightened risk associated with that condition. Insurers evaluate applicants based on the information provided, and undisclosed health issues can indicate that the applicant may require more medical care than anticipated, leading to increased costs for the insurer. By declining the application, the insurer protects itself from the financial implications of covering a risk that was not accurately disclosed during the underwriting process.

In contrast, other actions—such as issuing a policy without exclusions, increasing the premium significantly, or issuing a standard policy—would imply acceptance of the risk without a proper evaluation of the applicant's medical history. Declining the application is a prudent step to mitigate potential losses and ensure that only those who meet the insurer's underwriting criteria are granted coverage.