What is "substandard risk" in life insurance?

Substandard risk in life insurance refers to an applicant who poses a higher risk than average to the insurance company. This classification typically arises due to various factors, such as health conditions, lifestyle choices, or dangerous occupations that could potentially lead to a higher likelihood of claims. As a result, applicants identified as substandard may face higher premiums or may be offered limited coverage options reflecting their elevated risk level to the insurer.

In contrast, an applicant who poses an average risk would not be classified as substandard but rather as a standard or preferred risk, meaning they are expected to have a normal mortality and lower likelihood of requiring benefits. Other options, like applicants with no driving experience or those who adhere strictly to lifestyle changes, do not accurately capture the essence of substandard risk, which is fundamentally about elevated risk profiles relative to the general population.