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Which of the following types of risk will result in the highest premium?

a. substandard risk
b. standard risk
c. preferred risk
d. all risks pay equal premiums

User Stvsmth
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1 Answer

7 votes

Final answer:

The a. Substandard risk will result in the highest premium as these individuals have a higher likelihood of experiencing a loss or making a claim.

Step-by-step explanation:

The highest premium will be charged for substandard risk. Substandard risks refer to individuals who have a higher likelihood of experiencing a loss or making a claim compared to the average person. Insurers consider substandard risks to be more costly to insure, and therefore charge higher premiums to compensate for the increased risk. Such risk features refer to characteristics or conditions that make an insurance applicant or insured individual a higher-than-average risk.

This may include health issues, hazardous occupations, or risky behaviors. Insurers may charge higher premiums or impose specific conditions to mitigate their risk. Evaluating substandard risk features helps insurers assess the likelihood of claims and determine appropriate coverage terms.

User Hetal Vora
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