When you apply for an insurance policy, you will be asked a number of questions. For example, the agent will ask you a number of demographic questions such as your name, age, sex, address, etc. In addition to these demographic questions, you will be asked a number of other questions which will be used to determine what type of risk you are. For example, when an insurance company is deciding whether or not to offer auto insurance to a potential policy owner, it will want to know about the person's previous driving record, whether there have any recent accidents or tickets, what type of car is to be insured and various other types of information.

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All of this information will be used for two purposes. First, based upon the responses to these questions, the insurance company will decide whether the profile of the applicant is consistent with the type of risks the insurer is trying to attract. Some insurers specialize in offering insurance to only very safe drivers and therefore will only accept applications from people who fit the profile of a safe driver. Second, once the insurer has decided that your risk profile is consistent with the types of risks it accepts, the answers to the questions will be used to determine which rate to charge you. For example, the insurance company will decide whether you should be offered insurance at the high-risk driver rate or the low-risk driver rate.