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Substandard risk describes a person who is not acceptable by an insurer at standard rates because of their health history, occupation, or hobbies. A substandard risk is an individual or business that has an increased probability of filing an insurance claim. This is generally determined by taking into account the health and lifestyle of the individual or business.
For example, an individual with a history of medical issues, such as diabetes or high cholesterol, is considered a substandard risk. This is because the individual has a higher probability of filing a claim due to their chronic medical condition. Similarly, an individual who works in an industry that is associated with a high risk of liability, such as construction or aviation, is also considered a substandard risk.
Hobbies can also put an individual into the substandard risk category. For instance, individuals who engage in risky activities, such as rock climbing or skydiving, are more likely to file a claim due to the increased probability of an accident or injury.
Insurers typically assess the risk associated with an individual or business before offering a policy. Those who are considered a substandard risk are typically charged higher premiums as a way to offset the increased risk.
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