Which type of risk would likely lead to a higher premium?

Substandard risk refers to individuals who present a higher likelihood of experiencing a loss due to various factors such as health conditions, lifestyle choices, or hazardous occupations. Because these individuals are statistically more likely to file claims, insurers assess this additional level of risk when determining premium rates. As a result, premiums for substandard risks are higher to compensate for the increased probability of payout in the event of a claim.

In contrast, standard and preferred risks are associated with average or better-than-average health and lifestyle choices, leading to lower premiums. Average risk would typically fall in line with standard risk assessments, not warranting an increase in premiums. Therefore, substandard risk demands a higher premium due to the inherent risks involved.