Final answer:
Insurers require proof of current employment when offering a disability income policy with a future increase rider to assess the insured's income level and ensure they are employed at the time of the underwriting.
Step-by-step explanation:
When offering the insured a disability income policy with a future increase rider, insurers typically impose an underwriting requirement to provide proof of current employment. This requirement enables the insurance company to assess the insured's current work situation and income level, which are critical for determining the amount of coverage and premium rates. A future increase rider allows the insured to increase their coverage in the future without undergoing additional medical exams or underwriting, so insurers want to ensure that the policyholder is employed at the time of the initial underwriting.
Underwriting standards are guidelines set by banks and lending institutions for determining whether a borrower is worthy of credit (i.e. a loan). Underwriting standards help set how much debt should be issued, terms, and interest rates. These standards help protect banks against excessive risk and losses.