Who is considered a preferred risk in insurance?

Who is considered a preferred risk in insurance?

• A. Anyone insuring property
• B. A high-risk individual
• C. An applicant with a lower likelihood of risk
• D. A first-time applicant for insurance

Answer: (C)

A preferred risk in insurance refers to an applicant who is assessed to have a lower likelihood of experiencing losses or claims. These individuals or entities typically exhibit characteristics that reduce the probability of a claim being filed. Insurers often categorize such risks as being more favorable, leading to better premium rates and terms. For example, a preferred risk might be a healthy individual seeking health insurance or a well-maintained property being insured. This designation is significant because it helps insurers manage their overall risk exposure effectively, allowing them to offer lower premiums to those deemed less likely to require payouts. The other aspects, such as anyone insuring property, a high-risk individual, or a first-time applicant, do not align with the characteristics defining a preferred risk. Each of these categories may present varying levels of risk that do not inherently suggest a lower likelihood of claims.

A preferred risk in insurance refers to an applicant who is assessed to have a lower likelihood of experiencing losses or claims. These individuals or entities typically exhibit characteristics that reduce the probability of a claim being filed. Insurers often categorize such risks as being more favorable, leading to better premium rates and terms. For example, a preferred risk might be a healthy individual seeking health insurance or a well-maintained property being insured. This designation is significant because it helps insurers manage their overall risk exposure effectively, allowing them to offer lower premiums to those deemed less likely to require payouts.

The other aspects, such as anyone insuring property, a high-risk individual, or a first-time applicant, do not align with the characteristics defining a preferred risk. Each of these categories may present varying levels of risk that do not inherently suggest a lower likelihood of claims.