Washington Life Producer Practice Exam

What term describes an individual who is not eligible for standard insurance rates due to health risks?

1. Preferred risk

2. Standard risk

3. Substandard risk

4. Exempt risk

The correct answer is: Substandard risk

The term that describes an individual who is not eligible for standard insurance rates due to health risks is "substandard risk." This classification applies to individuals who present a higher likelihood of filing claims because of their health conditions or lifestyle choices, resulting in insurers charging them higher premiums than standard rates. Substandard risk categories may include individuals with chronic health issues, those who smoke, or individuals with dangerous occupations. Insurers use this classification to manage risk more effectively, ensuring that they can cover potential claims while also remaining financially viable. Understanding this classification is important for both insurance professionals and consumers, as it impacts the affordability and accessibility of insurance options for those identified as substandard risks.