In which situation might an insurance policy's coverage be altered?

In the context of insurance underwriting, a substandard risk refers to an individual who presents greater risk to the insurer than the standard population due to factors such as health issues, lifestyle choices, or other identifying characteristics. When an applicant is deemed a substandard risk, an insurance company may alter the coverage terms. This alteration could involve higher premiums, exclusions of certain coverage, or a reduction in the overall amount of coverage offered.

In contrast, a favorable medical history or being classified as a preferred risk typically leads to better coverage terms or lower premiums, as these individuals are seen as less likely to incur claims. Furthermore, simply requesting a higher coverage amount does not necessarily prompt an alteration in the policy's coverage terms but rather may lead to a reassessment of the risk associated with that increase, possibly requiring additional underwriting, which can still lead to various outcomes based on the individual’s overall risk profile. Thus, the classification of being a substandard risk is the clear situation where policy coverage may be significantly altered.