How are substandard risks characterized?

Substandard risks are characterized by having a higher likelihood of claims due to their health status, lifestyle, or other factors that may negatively impact their insurability. As a result, these individuals are required to pay higher premiums compared to standard risks. This adjustment in premium is necessary to compensate the insurance company for the increased risk associated with insuring these individuals.

Unlike average risks, which can be insured at standard rates and do not require additional financial consideration, substandard risks present a greater potential for loss, prompting insurers to adjust premiums accordingly. Furthermore, while there are individuals who may be uninsurable, substandard risks are still eligible for insurance coverage, albeit at a higher cost. This classification ensures that higher risks are accounted for in the pricing structure of insurance products.