What is a "substandard risk" in insurance terms?

A substandard risk refers to an individual who presents a higher risk to the insurer due to various factors such as health conditions, lifestyle choices, or family medical history. Because these individuals are statistically more likely to make a claim, insurers typically charge higher premiums to offset the additional risk they take on. This classification allows insurers to maintain profitability while still providing coverage to those who may not qualify for standard rates. Understanding this term is crucial because it clearly demonstrates how risk assessment in underwriting directly impacts premium costs and availability of insurance products for consumers with varying risk profiles.