The price you pay for life insurance is, in large part, determined by your policy’s rate class. To find out how you qualify for the best rate class life insurance, read this blog.
So you’ve decided to buy life insurance. Terrific. But how do you know that you’re getting the best price on your policy? After all, there are many factors that are used by insurance companies to calculate your individual policy rate. But more on that in a moment. First, let’s talk a little bit about how life insurance rates are determined.
First, let’s remember that insurance companies are in the “risk assessment” business. And like most businesses, insurers are not in the business of losing money. So they assign a specific level of risk to each policy applicant, based on a number of definitive factors. It is role of the insurance underwriter to weigh each factor and assign a rate class (or price) that satisfies the carrier’s level of acceptable risk.
What are the major rate classes?
Most insurance carriers have four primary rate classes. They are:
• Preferred Plus (Best) – The best rate you can get. While criteria vary from company to company, to get this rate, you typically must be in excellent health (with no history of heart disease or cancer among parents or sibling, prior to age 60), not overweight, be tobacco-free (for 3 to 5 years), have no history of drug and alcohol use, and not participate in hazardous activities.
• Preferred – Not as good as Preferred Plus, but pretty darn good. To get this rate, you must be tobacco-free for 1 year or more, have a good driving record, and not participate in hazardous activities.
• Select – Somewhere between Preferred and Standard rate classes.
• Standard – This rate is for people who have some minor health impairments, such as elevated cholesterol levels or being overweight.
People who have more than just minor health problems fall into a Substandard rate category. The Substandard category covers a series of several class called Table ratings. Table rated policies are usually identified with a letter or number (ex. Standard Table A, B, C… or Standard Table 1, 2, 3…). And pricing will typically go up 25 percent per table over Standard rates.
What are the factors that can affect one’s individual life insurance rate class?
There are many factors that are used to determine an applicant’s rate class. Among the top risk elements are:
1) Smoking – This one’s a biggie. Cigarette smokers (or other forms of nicotine consumption) is the biggest risk factor by far. For example, at age 40, a cigarette smoker will pay approximately FOUR times more than an otherwise healthy non-smoker for a 20-year term policy!
2) Obesity – Being obese greatly increases your risk for heart disease and diabetes. Both are major health concerns, in and of themselves. If your Body Mass Index (BMI) is higher than what’s considered to be the “healthy” range, your premiums will likely be higher.
3) Other medical conditions – For example, high cholesterol, asthma, cardiovascular disease, sleep apnea, and depression can cause your rates to rise.
4) Driving record – If you have a lot of tickets and/or accidents, the insurance company might make the determination that you live a rather reckless lifestyle. And they’ll ding you for that.
5) Occupation – People who have dangerous professions, such as auto racers, bull riders, high-rise window washer, etc., are statistically at a higher level of risk of death than a barista. Underwriters will have their red marker at the ready.
6) Hobbies – If you like to skydive or bungee jump, you’re bound to give any underwriter a case of acid reflux.
If you can change or improve your vulnerability to these risk factors, you CAN qualify for an improved rate class and get better rates as a result.
For more information about reducing your risk factors, or if you’re ready to purchase some life insurance, come to AccuQuote. We know which companies are most lenient on each underwriting issue, and can get you competitive life insurance quotes from the top-rated, brand-name insurance companies you know and trust.