Risk Class

What Does Risk Class Mean?

A risk class, in the context of insurance, is a group of either companies or individuals that share various traits. This group provides information to the insurance company that is important to the decision-making process when it comes to the approval of policies.

Insuranceopedia Explains Risk Class

Insurance companies simply need to determine whether having certain individuals or companies will be financially beneficial to them. They take groups of these companies or individuals and categorize them based on their similar traits. For example, if individuals smoke cigarettes, it may be more financially risky to provide them with health and death benefits. Risk classes also help insurance companies decide as to how much coverage will be needed.