PSI Life Exam Practice Test 2026 - Free Life Insurance Exam Questions and Study Guide

The term used for an individual who does not qualify for standard insurance rates due to health issues is "substandard risk." This classification applies to individuals whose medical history or current health status falls below the criteria set for standard insurance underwriting, often resulting in higher premiums or specific policy exclusions.

Substandard risks are typically assessed based on factors such as chronic health conditions, recent medical treatments, or lifestyle choices that could affect their life expectancy or likelihood of making a claim. Insurers apply this term to ensure they accurately price insurance policies according to the risk presented by these individuals.

In contrast, individuals classified as preferred risk typically have better than average health profiles, allowing them to benefit from lower premiums. Standard risk refers to the average individual who meets the typical underwriting criteria without major health issues. The term high-risk individual could refer to anyone with significant risk factors but does not specifically align with the structured classification used by insurance companies to denote those who fall outside the standard risk category due to health-related issues.