Final answer:
Applicants for basic term life insurance must provide personal information such as marital status and medical conditions, but they are not typically required to divulge their occupation. This information helps insurers assess risk and determine fair premiums due to the concept of adverse selection.
Step-by-step explanation:
When considering taking out a basic term life insurance policy, applicants generally have to provide certain personal information to the insurer to help them assess the risk and calculate the insurance premium. The types of information typically required include the applicant's marital status, medical conditions or treatments, and other details like other life insurance policies in force. This information is crucial for the insurer due to the concept of adverse selection, where individuals with higher health risks are more likely to apply for life insurance than those with fewer or no health risks. However, the applicant should NOT expect to have to divulge his occupation when applying for a basic term life insurance policy as it may not be relevant to the risk assessment for a death benefit.
Insurance companies are aware that an individual often knows more about their health history than can be uncovered through an investigation. In life insurance, such personal details help in determining the actuarially fair premium—it's the amount that, if paid by all members of a specific group, accounts for the expected claims and administrative costs without profit. This is precisely why insurers require such details about medical conditions or previous treatments. On the other hand, a person's occupation might not have a direct impact on the risk associated with providing a life insurance policy, although it could be a factor in certain types of insurance such as disability or accident insurance.