Classified Insurance

Insurance companies often underwrite policies for a variety of different risk classes. In the case of life insurance, for example, the insurer may provide coverage to healthy individuals, considering this group a low risk because they are less likely to die - an event which results in a claim being made against the policy. As a result, the insurer is more likely to offer the policy to healthy individuals at a lower premium. On the other end of the risk spectrum, the insurer may provide coverage to less healthy individuals but charge a higher premium.
Classified insurance is provided to individuals with substandard risk profiles, meaning that the policyholder is more likely to be involved in an event that could result in a claim being filed. In order to protect itself from known medical conditions, such as heart disease, the insurer may deny coverage. This exclusion is stated in the insurance contract. Alternatively, the insurer may provide reduced benefits for the condition. In general, eligibility for the policy is expanded to a larger group of people, but the scope of the insurance coverage is reduced compared to coverage provided by policyholders with a standard risk profile.
Individuals who purchase a classified insurance policy are likely to be charged a higher premium because of the higher risk that they pose to the insurer. This makes the insurance policy a rated policy. The premium charged for the policy is set according to how substandard the risk is considered to be. Insurers will use a mortality or morbidity table to determine the premium for covering particular health risks, adding a percentage markup to account for the higher risk.
Most applicants for insurance coverage are considered standard risks.


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