Understanding life insurance health classes and how they affect your rates are something you should know and understand if you are planning on purchasing life insurance. These are also known as life insurance risk classes. This is the most important factor a life insurance underwriter uses to determine you rates and premiums. You probably heard the terminology such as “Preferred”, “Super Preferred”, “Standard Plus”, “Standard”, but what is this all about? This is some basic terminology you should understand.
This article will show you how life insurance health classes are calculated and finally assigned to the life insurance applicant.
If you are thinking about what the advantages are to understanding this terminology. The answer is, it will help you to receive lower rates when you apply for your new life insurance policy. Your health class has a major impact on what your premiums are going to be. We don’t want you to pay any more than you have to.
Life insurance health classes have a major impact on your final rates.
People who are in the dark concerning health classes are going to miss the boat getting the lowest rates. Paying the lowest premium possible for your life insurance is what it’s all about. When you read this article you will see a comparison below of 3 rates classes and their premiums. This will show you how important your assigned rate class will be. It is crucial when shopping for the best Term life insurance rates.
I think you will be surprised how much these risk classes have on your premium. You can also activate our life insurance quoting engine and compare free online life insurance quotes. You can change the health classes back and forth so you can see how much the life insurance rates change.
Let’s take a look at why underwriters use life insurance health classes in the first place.
The life insurance companies use health classifications to properly assess the risk they are undertaking. All applicants are different in one way or another. Some people are healthy, some have a few minor health conditions. Some have some serious life threatening medical issues. This also holds true for their height and weight, tobacco use or not. Also having hazardous occupations or sports that could take their life.
Here is a very simple example. If a 30 year old male named Jim who is a non-smoker, has no health problems. He has perfect height and weight and has a very safe job as an engineer. He only plays golf as a sport would not represent much of a risk for life insurance.
On the other hand, Joe who is also a 30 year old male is a cigarette smoker. He works as a chain saw operator for a logging company. He Sky Dives as a hobby and drinks over 6 mixed drinks a day would be a much greater risk. The life insurance company would be taking a much greater gamble than they would with our other example with Jim.
Let’s now take a look at what actually determines a rate classification.
Health History –
If an applicant has no pre-existing conditions and has no family history of Cancer or heart disease. If he takes no prescription medication and is normal in the height and weight department. The life insurance company with give them a thumbs up in this very important area of underwriting criteria. The applicant could very well be on his way to preferred rates.
Tobacco Use –
Tobacco use especially with cigarettes will definitely have a major impact on the life insurance rates. It has been proven without any shadow of a doubt that smokers do not usually live as long as non-smokers. Smoking cigarettes can double or triple your rates with no problem at all. If you are looking for low preferred rates and you smoke cigarettes, it is not going to happen. Smoking is one of the all time worst marks you can have on your application.
The lifestyle you have pertaining to sports, hobbies and your occupation is very important. If you are into such sports and hobbies such as scuba diving, skydiving, drag racing, rock climbing, bungee jumping, boat racing, motorcycle racing and aviation, you could possibly find higher rates because of these dangerous activities or a hazardous occupation.
Height / Weight –
Your height and weight is very important when applying for life insurance. Many people do not realize this until they apply. Then there can be an unexpected surprise to say the least. Life insurance companies go by build charts that show the recommended weight for each height category. Also along with the gender of the individual. For example if you are slightly overweight you may go from preferred rates to standard plus.
If you are more than just a little overweight you class could be standard. You can even go into the rate table which we will also go over in this article. Just keep in mind that your height and weight is just as important as your health history. This is because your health is going to be based on your height and weight when looking at statistics. This is based on how weight affects a persons overall health and lifespan.
Family Health History –
Your family health history refers to your parents and siblings. This is to see if there is a noticeable history of health conditions such as Cancer or heart disease. Needless to say you have no control over this but the life insurance companies take it very seriously. Close family members that have passed away before 60 years of age. Also from heart problems or various forms of Cancer, it will set off a red flag. They are basically looking for a track record in your immediate family. This could indicate that you would have a greater chance of being diagnosed with one of these potentially fatal diseases.
Alcohol / Drug Use –
The life insurance underwriters pay close attention to alcohol consumption and abuse. This can lead to an early death if people fail to control their drinking. You are definitely allowed to consume alcoholic beverages with no problem at all but they have to be within reason so you are not destroying your health. Drugs on the other hand that are not prescribed by your doctor are another story.
Marijuana is acceptable when used in moderation. Chemical drugs such a Cocaine, Hash, Methamphetamine, Heroin are out of the question where you will certainly be declined.
There are a few other factors that determine you rate classification but these by far are the most important ones. Anytime one of our applicants has any of these issues we always run a pre-screen to see what life insurance company is going to offer us the lowest rates. Choosing the most applicable company is crucial when looking for the lowest Term life insurance quotes. Or even permanent life insurance such as Universal life for that matter.
Let’s take a look at the list of possible rate classifications.
Keep in mind that the main 3 tiers of rate classes are:
*Preferred Plus, Preferred, Standard Plus, Standard Classes
*Smoker Rate Classes
*Sub-Standard Rate Classes
Also known as Super Preferred which is the very best classification you could ever receive. About 10% of applicant can qualify for Preferred Plus. You have to be in excellent health with the proper height & weight ratio, and your family history is clean and right on the money.
Preferred is an excellent rate class to be in. This will entitle you to have very low rates not quite as good as Preferred Plus but still very competitive. You could have some minor issues like high cholesterol and high blood pressure. But it has to be controlled with medication. Most healthy people fall into this category if they are in good shape.
This is still a very good rate class to be in if you have a few health issues or possibly some height and weight abnormalities. Many people fall into this rate class especially if they are in their 40s, 50s, or 60s. Their health is starting to have some health conditions arise which is perfectly normal in these age groups. You would still have to have a good family health history stemming from your parents.
In the Standard class you would be experiencing some problems with height and weight, your medical tests are no longer squeaky clean and you might have a small list of medical conditions that are not terrible but you have to keep your eye on them. This as a common class for people in their 50s and 60s but the rates are still very affordable. As you get older your health is naturally going to get tarnished. But this effect is perfectly natural and this is unavoidable as you get older.
Substandard (with table ratings):
The Substandard rate class is not a specific rate class like the others above but it is a scale of table ratings that will be based on your health history graded by letters or numbers which would normally be either the letters A-J or numbers 1-10. This is normally because you have a more serious health history, or you’ve had some recent medical setbacks. Such as a heart attack, heart surgery, a diagnosis of diabetes or other complicated health problems.
If your life insurance rate class is in the “Standard” rate class. There is an addition of 25% for every step you go down on the table:
A = Standard + 25%
B = Standard + 50%
C = Standard + 75%
D = Standard + 100%
E = Standard + 125%
F = Standard + 150%
G = Standard + 175%
H = Standard + 200%
I = Standard + 225%
J = Standard + 250%
The maximum you could be paying is up to an extra 250% on your premiums. This could get costly but the main concept to consider is you would still be insured. If you have dependents who are counting on your income coming in. You would still be protecting their financial future in case you passed away.
Smoker Rates –
If you smoke tobacco products, there will be two smoker classes an insurance company will place you in. You will always pay more for using tobacco because of the health risks tobacco has been known to cause. The Preferred Smoker is the better of the two rate classes for smokers. You would qualify for this rate class if you are an occasional smoker or you use the smokeless tobaccos. Such as snuff or leaf type tobacco such as Red Man, Beech-nut or Levi Garrett.
The Standard Smoker class is where you would fall for regular cigarette smoking and steady cigar smoking also. We highly recommend people give up smoking and improve their health. Keep in mind that if you purchase a life insurance policy with a smoking rate and you quit smoking. You can always make a request that you smoking rate be dropped. Your rate class can be changed to non-smoker which would drastically reduce your life insurance premiums.
Here are some examples of three health classes and how they affect the rates.
Our example will use our 30 year old male (non-smoker) with a 20 year term life insurance quote. We will use a face amount of $250,000. Also, we can compare one extreme to another starting with Preferred Plus, Standard and Standard with the highest table rating.
Protective Life – $153.73
Lincoln National – $155.00
American General – $156.50
Banner – $157.49
United of Omaha – $162.50
Lincoln National – $267.00
Banner Life – $267.49
American General – $271.50
Protective Life – 274.15
Transamerica – $275.00
Standard (Rate Table 10 or J):
Banner Life – $660.22
United of Omaha – $842.50
John Hancock – $929.25
Protective Life – $959.53
John Hancock – $980.36
These are the top 5 rates for each of the three rate classes. Notice the extreme difference between our Preferred Plus premium of $153.73 to the Standard rate table 10 of $660.22. This is otherwise known as the letter J depending on what company you are quoting. This is why I say the health class otherwise known as your rate class is so very important.
Complete the form on the right to activate our life insurance quote engine. You can instantly compare Term life insurance rates from over 40 trusted companies.
I hope that this article has answered many of your questions concerning life insurance health classes and how an applicant is placed in a specific rate class. You can save quite a bit of money by working with your agent to choose the most applicable company. This will give you the best health class so you can enjoy paying the lowest premium possible. Always remember that the independent agents and brokers such as ourselves offer the biggest selections of companies to choose from. We work with over 40 of the most trusted life insurance companies. This will assure our clients the very best opportunity to find the lowest rates.
Contact us 7 days a week so we can answer any of your questions with no cost or obligation. You may visit our About Us page for more information about us and our business. Thank you for taking the time to read this blog post.