What type of rates are charged to individuals considered to be higher-risk in life insurance?

In life insurance, individuals who are classified as higher-risk due to factors such as pre-existing health conditions, lifestyle choices, or hazardous occupations are charged substandard rates. These rates reflect the increased probability that the insurer may have to pay a claim sooner than for someone deemed a standard risk. Substandard rates are generally higher than standard rates because they compensate for the additional risk taken on by the insurer when insuring these individuals.

Individuals receiving substandard rates may also be subject to additional underwriting scrutiny, and their policy might come with certain limitations or exclusions based on their health or lifestyle risks. Insurers employ these differentiated rates to balance the risk pool and ensure that premiums correspond to the level of risk presented by the insured.