Santosh has applied for a term insurance policy. His anticipated mortality is significantly lower than standard lives and hence could be charged a lower premium. Under risk classification, Santosh will be classified under _________.

Solution (By Examveda Team)

Santosh has applied for a term insurance policy. His anticipated mortality is significantly lower than standard lives and hence could be charged a lower premium. Under risk classification, Santosh will be classified under Preferred risks. A preferred risk is a policyholder who is considered significantly less likely to file claims. Therefore, insurance companies prefer it over a standard or higher risk because the former represent a better chance to make more profit. For the insurer, fewer claims equates to more money taken in and less money paid out.