New York Child Abuse Identification and Reporting Practice Exam

Which of the following is NOT a way to classify risk in insurance?

1. Preferred risk

2. Standard risk

3. Substandard risk

4. Non-nicotine risk

The correct answer is: Non-nicotine risk

The classification of risk in insurance is crucial for underwriting and determining premiums. In insurance terminology, 'preferred risk,' 'standard risk,' and 'substandard risk' are established categories used to evaluate the likelihood of loss based on an individual's health, lifestyle, or other significant factors. Preferred risk refers to individuals who are deemed to have a lower probability of making a claim, often due to favorable health conditions or lifestyle choices. Standard risk covers individuals who are considered average in health and risk factors. Substandard risk accounts for those who pose a higher risk, which could be due to health issues, hazardous occupations, or other factors that elevate their likelihood of making a claim. Non-nicotine risk, however, is not a commonly recognized classification in the broader context of insurance risk categories. While it may refer to non-smokers or individuals who do not use nicotine, this term does not fit within the standardized risk classification systems used by insurance companies. Instead, it's typically considered a component or factor that might be discussed during the underwriting process but is not a standalone category like the others.