What type of risk assessment uses health and lifestyle indicators in the insurance industry?

The correct answer is preferred risk assessment. In the insurance industry, this type of assessment is designed to evaluate an applicant's health, lifestyle, and other personal factors to categorize them as low-risk individuals. Preferred risk assessments typically involve looking at indicators such as medical history, body mass index, smoking status, and exercise habits, among others. Individuals who present with favorable factors are often offered lower premiums because they are considered to have a lower likelihood of filing a claim.

Preferred risk assessment is fundamental for insurance companies as it helps them manage their risk pools effectively. By identifying and rewarding lower-risk individuals, insurers can improve profitability and ensure that they are serving their coverage needs appropriately. This method contrasts with other types of assessments that may focus on broader financial factors or classifications.