What does the term "impaired risk" mean?

The term "impaired risk" refers to individuals whose health issues or medical history may negatively impact their insurability. This can include a wide range of conditions, such as chronic illnesses, a history of significant health problems, or other factors that could influence the likelihood of filing a claim. Insurers assess impaired risks carefully since these individuals may present a higher probability of insurance payouts compared to those with no health complications. Thus, when determining premiums or issuing policies, insurance companies often have specific criteria for evaluating these risks, which can lead to adjustments in coverage availability or pricing based on the individual's health status. This understanding is essential in the life insurance industry, as it guides both brokers and clients in comprehending coverage options and expectations.