Risk Appraisal

What Does Risk Appraisal Mean?

Risk appraisal is the process of evaluating the likelihood that a policyholder will file a claim. It is used to determine premium rates for individuals applying for coverage. Once the applicant’s risk is assessed, they are assigned to a specific risk class by the insurer, who then offers insurance options with premiums based on that classification.

Insuranceopedia Explains Risk Appraisal

Individuals who present higher risks to insurance companies typically face higher premiums. This is because they are perceived as more likely to incur costs for the insurer over time. On the other hand, applicants with lower risks of filing a claim generally receive lower premiums, as they are seen as less costly to insure.

If an applicant’s risk is considered too high, they may be disqualified from obtaining life insurance or certain other types of coverage.