What defines an individual as a preferred risk in insurance?

An individual is defined as a preferred risk in insurance primarily due to their ideal health status. This designation means that they are typically in excellent health, have a lower likelihood of requiring extensive healthcare services, and present a lower risk to the insurer. As a result, preferred risks are often eligible for lower premiums compared to standard or substandard risks. Insurers evaluate various factors, including medical history, lifestyle choices, and family health history, to determine whether an individual qualifies for this category.

The characteristics that would exclude someone from being considered a preferred risk include having multiple chronic conditions, which signifies a higher risk of health issues, or maintaining a riskier lifestyle that could lead to increased health problems. Additionally, individuals who are minors seeking insurance may have different underwriting criteria and are typically not categorized in the same way as adults regarding risk assessment.