Which of the following describes a person NOT acceptable by an insurer at standard rates because of health history, occupation, or hobbies?

• A. Substandard Risk
• B. Standard Risk
• C. Preferred Risk
• D. Declined Risk

Answer: (A)

Underwriting classifies applicants by risk. When health history, occupation, or hobbies indicate a higher-than-average risk, the insurer assigns a substandard risk. Substandard risks aren’t offered standard premiums; they may be charged higher premiums or given coverage with limitations or special rating. This differs from standard risk (standard rates), preferred risk (beating standard rates), and declined risk (no coverage offered at all). So, a person not acceptable at standard rates because of health history, occupation, or hobbies fits the substandard risk category.