Life insurance flat extra fees are additions to the base premium to cover the high risk factors associated with dangerous occupations, sports & hobbies.
How Do Life Insurance Flat Extra Fees Work? The Ultimate Guide for 
Life insurance flat extra fees, what are they, and what do they do? Just about all of us who have purchased life insurance at one time or another fully understand the concept of having a premium to pay each year.
Many people don’t realize that your health history, height & and weight, tobacco use, and other specific information about you can impact rates.
Medical underwriters reviewing your life insurance application usually calculate adjustments to your life insurance rates. Therefore, these fluctuations in your final rates are traditionally impacted by choosing the health rate classification to fit your profile.
One of the ways your final rates can be adjusted is by using flat extra fees, which we will discuss in this article. Unfortunately, the terminology flat extra fees and charges are something few people have heard of, much less understand.
Table of Contents
- What Are Life Insurance Flat Extra Fees?
- Examples of Life Insurance Flat Extra Fees
- What Are Life Insurance Health Classifications?
- Flat Extra Fees & Health Classifications Compared
- What Are the Specific Health Classifications?
- What Are Standard Rate Class Table Ratings?
- How Can I Get the Best Health Classification?
- How Can I Eliminate Getting a Flat Extra Fee?
- Should You Work With an Independent Agent?
- Why Pre-Screen Your Application Before You Apply?
- Can Flat Extra Fees Be Removed Later?
- In Conclusion
Flat extra fees are straightforward to understand. They are an additional charge to a life insurance policy to compensate the carrier for an increased risk. Here are some of the risky categories:
Life insurance flat extra charges are based on a dollar amount added to each $1,000.00 of life insurance coverage, known as the policy face amount or death benefit.
The dollar amount would commonly be, for example, $1.50, $2.50, $3.00, $5.00, etc. The exact amount of the flat extra would be determined by the risk involved and its intensity toward a possibly fatal outcome.
Some people refer to these added costs as a life insurance flat extra premium, but they are just an extra charge and not really a premium.
Often times we can use a company that does not utilize flat extra fees on life insurance, but this will depend on the type of high risk involved.
The next time someone asks you what is a life insurance flat extra fee is, you will be able to explain the process to them.
Take a look at these examples of flat extras being used on life insurance applications which make them easier to understand.
Keep in mind that life insurance is purchased in units of $1,000.00.
Here are two examples of flat extra fees being used. The first is for an occupation and the second for a sport or hobby.
*Example number 1 – We will use a 30-year-old male with a very high-risk job as a commercial fisherman. He wants to purchase a $250,000 term life insurance policy. The base cost of the policy would generally be $800.00 per year.
However, the life insurance company he is applying with wants to add a $3.00 flat extra fee to his policy. Since the face amount is $250,000, the flat rate would be multiplied times the face amount.
$3.00 (flat extra) x 250 (face amount) = $750.00. Add the $750 to the base premium of $800.00, and the total becomes $1,550.00 annually.
*Example number 2 – A 35-year-old male who has a hazardous sport as a skydiver. He wants to purchase a $100,000 term life insurance policy.
The base cost of the policy would typically be $550.00 per year. However, the life insurance company he has applied with wants to add a $2.50 flat extra fee to his policy. Since the face amount is $100,000, the flat rate would be multiplied times the face amount above.
$2.50 (flat extra) x 100 (face amount) = $250.00. Add the $250 to the base premium of $550.00, and the total becomes $800.00 annually.
Life insurance companies we choose rarely impose flat additional fees on policies, but such fees may apply to a very high-risk occupation, hobby or sport.
Health classifications are calculated for all life insurance policies and are mainly based on an applicant’s health history.
As a standard procedure with life insurance companies, the underwriting department must review it thoroughly when you apply.
Medical underwriters compile their detailed information to determine your health classification at the end of the application process.
A health classification, otherwise known as a rate classification, is a classification you are placed in based on your projected mortality.
The big difference is that these two forms of premium adjustments are related to a certain extent. The flat extra fees are used for high-risk occupations, hobbies, and sports.
Rate class adjustments are used when calculating the risk of an applicant’s health history. The bottom line is they are used for entirely different purposes.
If a person applies for life insurance and he has a heart condition for example, the carrier will adjust his health classification accordingly.
If another person is applying for life insurance and has an occupation as a professional race car driver, the carrier will be using a life insurance flat extra fee to adjust the premium accordingly to cover the risk exposure of the auto racing.
Here are the four primary health classifications you can be placed in:
- Preferred Best (Super Preferred)
- Standard Plus
A description of these four classes would be as follows:
Preferred Plus Rates
Depending on the insurance company, this class can be referred to as Super Preferred. This would be the best class you could be placed in, providing you with the lowest possible rate. You have to be in excellent health, height & weight and live without dangerous sports or occupations.
Your family history must also be free of early cancer or heart disease deaths. About 10% of all applicants qualify for the preferred best rates.
Suppose you are healthy and fail to qualify for the preferred best rates. You stand an excellent chance of qualifying for preferred rates. This can be ideal even if you have prevalent health conditions such as high blood pressure or high cholesterol if they are adequately controlled with medication.
Landing in the preferred rate class would be an ideal situation to be classified in, even though the rates are a little higher than the preferred best.
Standard Plus Rates
Some popular companies, such as Banner Life, do not offer standard plus rates, but most do. Suppose you are in good health and fall outside the requirements to meet the preferred rate classes. Standard plus rates will still be very affordable.
Your family health history has to be good, and you can have a few medical conditions checked with prescription drugs. Being overweight is allowed within reason, depending on the carrier you apply with.
Standard rates would be expected for applicants in decent health but may be slightly overweight and have a few medical concerns that don’t appear to be very life-threatening. For example, you have a less ideal height-to-weight ratio, an average life expectancy, or your medical history has a few flags.
Your family health history would also have to be free of any of your parents passing away before age 60 from heart-related or cancer as a cause of death.
Table ratings are used for applicants with a serious health condition.
Applicants with more serious medical conditions may fall into a Substandard Rate Class. In addition, a substandard rate class can also be incorporated with additional rate classes called Table Ratings.
Remember that the tobacco rate is one of the most expensive categories for tobacco users.
Tobacco rates can be approximately 250% higher than non-smoker rates. This would especially be for cigarette smokers at the highest risk for tobacco users.
Even chewing tobacco can increase your rates. These table ratings are a direct reflection of your health history. This is not an area in which you want to be classified due to the much higher cost.
The table ratings are broken down by either letter of the alphabet from A to J or by the number system, which starts with numbers 1 to 10. With each table rating, the premium increases by 25%.
These ratings are for people with severe health conditions of considerable height to weight issues. The designation, either by letter or number, depends on the life insurance company you apply with.
- A or 1 – Standard Rate + 25%
- B or 2 – Standard Rate + 50%
- C or 3 – Standard Rate + 75%
- D or 4 – Standard Rate + 100%
- E or 5 – Standard Rate + 125%
- F or 6 – Standard Rate + 150%
- G or 7 – Standard Rate + 175%
- H or 8 – Standard Rate + 200%
- I or 9 – Standard Rate + 225%
- J or 10 – Standard Rate + 250%
Your application will generally be declined if it exceeds letter J or number 10 in the number system.
Receiving a preferred life insurance health classification is the golden nugget to getting the lowest rates and premiums. Here are my main tips to increase your probability of obtaining a favorable health class rating.
Do Not Procrastinate – Apply for life insurance as soon as possible. The longer you wait, the higher your premiums will be. Your life insurance rates increase by approximately 5% yearly and over 10% per year as you get older in your 60s.
On top of that, the older you get, the more health conditions you will develop, and the premium could drastically rise to the point where your premiums could be unaffordable, or you could be declined.
Improve Your Overall Health – Watching what you eat and getting more exercise can significantly impact your health. The healthier you become, the better the health class you can qualify for. Even if your parent’s health history is below average, your health is what insurers zero in on the most.
Smoking & Drinking – Using tobacco products will land you in the smoker’s rate classification, and your smoking rates will go up. If you get carried away and consume a lot of alcohol, you are putting yourself and your insurance rates in harm’s way. Life insurance for alcoholics or heavy drinkers could be costly, if not even possible.
Watch Your Weight – Becoming overweight or obese is one of the best ways to ruin your chances of getting affordable life insurance rates. Life insurance companies know that being overweight is directly linked to many life-threatening medical conditions, the biggest being heart disease. Remember that heart disease is the number one killer in the United States.
We never want anyone to apply and receive a flat extra fee. All that is going to do is increase your premium and we want to keep your premiums as low as possible. We usually know which companies are least likely to use flat extra fees and submit applications to them to help our clients save money.
This strategy will work many times but depending on your occupation or sport, it may be impossible. The more hazards you are exposed to, the more likely a flat extra fee could be applied. Flat extra charges are minimal and don’t affect premiums in many cases.
If you want to receive the lowest rates and have the most options, independent agents such as ourselves will be your best choice. An independent agent is also known as a broker. Independent agents like ourselves do not work for life insurance companies like captive agents do with companies like State Farm.
Brokers work with all the top-rated life insurance companies in America and shop the entire market for you. Life insurance health classifications and flat extra fees can be very positive when applying with the proper life insurance companies.
We always try to zero in on the best company for each specific applicant to get the best rates. Choosing a company that will offer the best health classification and eliminate life insurance flat extra fees is the formula for getting the best rates possible.
This can all be obtained by connecting with an independent agent. Their assistance is always free and with no obligation whatsoever.
If you want to eliminate any surprises during the application process, this is the way to do it. One of the most innovative things you can do is pre-screen your application before applying for life insurance. Not only can you pre-screen medical conditions, but you can also pre-screen your high-risk occupation, hobby, or sport if you have one.
This will eliminate surprises later on during the application process. Know what is going to happen before you apply and not after. We run medical pre-screens on just about every client to ensure we have an excellent smooth application process and receive low rates.
Flat extra fees can be removed at a later date with some of the companies. However, this could only happen if the high-risk exposure for which the flat extra was first initiated has been eliminated. For example, if you have a hazardous occupation and changed to a safe job or simply retired from that occupation.
Some companies would allow you to be considered for removal of the charge, but they would not just take your word over the telephone. You will have to complete another application and then re-submit it. The bottom line is it can normally be done.
Needless to say, life insurance, flat extra fees, health classifications, and other insurance-related terminology can be confusing. An insurance agent such as ourselves can answer all your questions with no cost or obligation.
Feel free to contact us seven days a week for all the help you need. If you want to apply for life insurance, we use over 40 of the most trusted life insurance companies.
You can also quickly and easily apply over the phone in about 15 minutes. I hope this blog post has answered many of your questions.
If you ever decide to apply and want to eliminate taking a physical exam. You can apply for no medical exam life insurance and be approved within 24-48 hours.
All the best,
Like most people, you probably have more questions about flat extra fees and how they may apply to you. Contact us today to help you at no cost or obligation. Our job is to help you understand life insurance and how it works. You can also set up a time at your convenience to talk.