Substandard Risk
What Does Substandard Risk Mean?
Substandard risk, also called impaired risk, refers to an individual deemed riskier to insure than the average person due to factors such as age, lifestyle habits, family medical history, health conditions, occupation, hobbies, morals, or residential environment. For instance, a cancer survivor may be classified as a substandard risk for health or life insurance policies.
Insuranceopedia Explains Substandard Risk
When an insurance company reviews an application, it assesses the applicant’s risk profile and classifies them as standard, preferred, substandard, or uninsurable. This classification determines the premium rate applied to the applicant’s risk level. Substandard applicants, due to their higher probability of loss, are charged higher premiums compared to those with standard risk classifications.
