What are the three ratings of classification that denotes the risk level of insureds?

The three classifications that denote the risk level of insureds are standard, substandard, and preferred.

Standard represents the average risk level for individuals, those who do not have significant health issues or risky lifestyles that would cause an insurer to view them as higher risk. This group typically receives standard premium rates.

Substandard refers to those individuals who pose a higher risk due to factors such as health conditions, hazardous occupations, or dangerous activities. Insurers label these individuals as substandard and will either offer them coverage at a higher premium or possibly restrict the coverage in some way.

Preferred classification is assigned to individuals who exhibit a lower risk profile than standard rates. This includes individuals who are in excellent health, have favorable health histories, or engage in healthier lifestyles. As a result, they are offered lower premiums compared to standard risks.

Recognizing these classifications is essential in assessing how insurance rates are determined and the profiles of insured individuals. The options that present low risk or high risk in different positions do not accurately reflect the commonly accepted risk classifications used in the insurance industry.