Which provision allows insurance companies to charge higher premiums for substandard risks?

The correct answer, classification underwriting, refers to the process where insurance companies assess the risks associated with insuring an individual or entity and categorize them accordingly. This classification helps insurers determine the appropriate premium rates based on the applicant's risk profile. Substandard risks are those individuals or entities that present a greater risk of loss compared to average risks; hence, they may have health issues, lifestyle choices, or other factors that increase their likelihood of claims.

With classification underwriting, insurers can charge higher premiums to these substandard risks, thus adequately compensating for the increased risk they present. This practice ensures that insurance remains viable and sustainable for both the insurer and the insured, as it spreads out the risk across a larger pool and adjusts rates according to individual risk factors.

The other options are not suitable in this context as they refer to different concepts related to insurance policies. An exclusion rider adds specific exclusions to a policy that can limit coverage; a premium adjustment clause involves changes in premiums based on specific conditions but does not directly address the categorization of risk levels; and an adjustable rate provision refers to fluctuating premiums over time, which is not inherently linked to the classification of risk.