What is the term for obtaining insurance after realizing a significant risk, such as needing extensive surgery?

The term for obtaining insurance after recognizing a significant risk, such as the need for extensive surgery, is known as adverse selection. Adverse selection occurs when individuals who are aware that they are more likely to need insurance are more inclined to purchase it, while individuals who believe they have a lower risk may choose not to. This behavior can lead to an imbalance in the insurance pool, where the insurer ends up covering a higher proportion of high-risk individuals than anticipated.

In this scenario, a person who realizes they require surgery may seek out insurance to cover the costs, knowing that their need for extensive medical care poses a greater risk for the insurer. This is not just a matter of ordinary risk assessment; it's about exploiting the knowledge of personal risk to obtain coverage that may otherwise have been unavailable when the risk was initially unknown.

Other terms—such as risk pooling, insurance fraud, and premium underwriting—describe different concepts within the field of insurance. Risk pooling refers to the grouping of multiple risks to ensure that the insurance spread over a larger base reduces the overall liability for the insurer. Insurance fraud involves dishonest behavior, like providing false information to gain undue benefits from an insurance policy. Premium underwriting is the process of evaluating the risk and deciding the premium rates, but it does