Why are "substandard risks" significant in life insurance underwriting?

Substandard risks are significant in life insurance underwriting because they consist of applicants who present higher than average health risks due to various factors such as pre-existing health conditions, hazardous occupations, or lifestyle choices like smoking. As a result, these individuals may be charged higher premiums to offset the increased risk they pose to the insurance company. In some cases, depending on the severity of the risk, these applicants might even be denied coverage altogether. This distinction is vital for insurers to manage their risk exposure effectively, ensuring that they can offer policies that are both financially viable and equitable for all policyholders. Understanding the concept of substandard risks allows underwriters to make informed decisions regarding coverage availability and pricing strategies in order to maintain the overall health of the insurance pool.