Which statement about substandard risk is true?

Which statement about substandard risk is true?

• A. They have a lower premium than standard risk
• B. They have a higher premium than standard risk
• C. They have the same premium as standard risk
• D. They are automatically declined

Answer: (B)

Substandard risk is a higher level of risk than average, so the premium must reflect that increased likelihood of a claim. Underwriting assigns a substandard rating to applicants with factors that raise their risk (like health issues, dangerous hobbies, or a hazardous occupation). To compensate the insurer for taking on this greater risk, the premium is higher than for standard risk. This doesn’t automatically mean the policy is denied; many substandard cases are issued at a higher rate or with riders/exclusions to address the extra risk. So the true statement is that substandard risk has a higher premium than standard risk.

Substandard risk is a higher level of risk than average, so the premium must reflect that increased likelihood of a claim. Underwriting assigns a substandard rating to applicants with factors that raise their risk (like health issues, dangerous hobbies, or a hazardous occupation). To compensate the insurer for taking on this greater risk, the premium is higher than for standard risk. This doesn’t automatically mean the policy is denied; many substandard cases are issued at a higher rate or with riders/exclusions to address the extra risk. So the true statement is that substandard risk has a higher premium than standard risk.