What characterizes a substandard risk in life insurance?

A substandard risk in life insurance refers to an applicant who presents a higher likelihood of claims due to various health issues or risk factors. As a result, these individuals typically face higher premiums than those who are considered standard risks. This classification acknowledges that their elevated health concerns increase the insurer's potential liability, necessitating an adjustment in the premium pricing to adequately cover that risk.

In contrast, options that imply lower risk or standard conditions do not accurately reflect the characteristics of substandard risks. An individual with excellent health ratings would be considered favorable and typically secure standard premiums rather than represent a substandard risk. Similarly, a person paying standard premiums or showing a lower likelihood of mortality contributes to a basic classification of risk, which does not align with the nature of substandard risks, who are deemed less favorable by the insurer due to identifiable health concerns.