Why might a person with a dangerous habit face higher premiums?

A person with a dangerous habit might face higher premiums because insurance companies need to mitigate their risks. Individuals engaging in risky behaviors, such as smoking or excessive drinking, are statistically more likely to experience health issues or accidents. This increased likelihood translates to a higher probability of the insurer having to pay out claims. To offset this heightened risk, insurance companies adjust their pricing models accordingly by raising premiums for those individuals. This helps the insurer maintain financial stability while providing coverage to all policyholders.