Substandard Group

What Does Substandard Group Mean?

A substandard group consists of individuals whom insurance companies consider riskier to insure compared to the average person. To account for the increased likelihood of filing insurance claims, these individuals are required to pay higher premiums for coverage.

Insuranceopedia Explains Substandard Group

Insurance companies classify applicants into groups based on their risk level, which determines the cost of coverage. A substandard group typically includes individuals deemed higher risk. For car insurance, this may include drivers with multiple accidents or traffic violations. Drivers in this category often need to file an SR-22 form with their state before they can get coverage again. Life and health insurance often includes individuals with pre-existing medical conditions that increase their risk of illness or death. Someone with diabetes, for example, will usually pay more and may have fewer options when shopping for life insurance for diabetics.

In addition to higher premiums, insurance companies may impose stricter coverage conditions for substandard groups. For example, a life insurance policy issued to someone who recently recovered from a severe illness might include a clause requiring the insured to survive a certain number of years before the policy becomes effective. The same logic applies to property coverage, where houses in wildfire zones or with older wiring may only qualify for high-risk homeowners insurance.