What is the definition of substandard risk in insurance underwriting?

Substandard risk in insurance underwriting refers to an individual who poses a higher risk due to various factors, such as health issues, lifestyle choices, or other characteristics that might increase the likelihood of a claim being made. This classification indicates that the applicant does not fit within the standard risk category due to these risk factors, thereby requiring the insurer to assess premium rates and coverage options accordingly.

Individuals who fall into this category might have specific health concerns, such as chronic illnesses, or may engage in lifestyle choices that are considered risky, such as smoking or participating in high-risk sports. As a result, they are typically subject to higher premiums or might receive limited coverage, reflecting the increased likelihood of insurance claims associated with their risk level.