Impaired Risk
An insurance applicant who presents higher-than-normal risk of filing claims due to health conditions, lifestyle factors, or other circumstances. These applicants may face higher premiums, coverage restrictions, or policy exclusions to account for increased risk.
Example
“Due to his diabetes diagnosis, Tom was classified as an impaired risk and faced 50% higher life insurance premiums than standard applicants.”
Memory Tip
Impaired = 'I'm-PAIRED' with higher risk - you're paired with extra danger that costs more to insure.
Why It Matters
Understanding impaired risk classification helps you anticipate higher insurance costs and prepare for additional medical exams or documentation. It also highlights the importance of securing coverage while healthy, as conditions can make future coverage more expensive or unavailable.
Common Misconception
People think being classified as impaired risk means automatic rejection for coverage, but most impaired risks can still obtain insurance. Insurers typically adjust pricing or terms rather than deny coverage entirely, though severe impairments might result in declination.
In Practice
Sarah applied for $500,000 life insurance after surviving breast cancer two years ago. As an impaired risk, she underwent additional medical testing and provided five years of medical records. The insurer approved her application but charged $3,200 annually instead of the $1,800 standard rate, and excluded cancer-related deaths for the first three years.
Etymology
From 'impaired' meaning damaged or weakened, combined with 'risk' from Italian 'risco,' meaning danger or hazard that increases likelihood of loss.
Common Misspellings
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Related Terms
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See Also
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