Life insurance rates are dependent on health. When asked for a quote, it is difficult to give an accurate answer without first inquiring about your health history. Life insurance carriers look at many different factors (i.e. personal health history, family health history, driving record, etc.), before they give you a rating class. Here’s a look at potential rate classes that can come about from a life insurance application.

Standard Rates
This is the most common rate class that you can receive from a life insurance carrier. When we first meet prospective clients, we like to share with them standard rate costs, as these are what the average consumer would receive. These ratings mean that the applicant is in standard health and thus would receive the standard rate for their life insurance policy.

Preferred Rates
In this rate class, clients that receive this are considered to be in excellent health and less of a risk for insurance carriers. Usually, these clients fit into a preferred height and weight category as well as have not had any health problems in their past or their family’s past. Many insurance carriers will discount the applicant’s rates if they are approved at standard rates. Some companies, like Ivari (formerly known as Transamerica), will go as far as offering elite ratings, which is a further discount of the applicant’s premium. While preferred rates are exceptional to have, we like to tell our clients to prepare themselves for standard rates when they apply, simply because the majority of people get approved at standard rates.

Substandard Rates
In contrast to preferred rates, insurance companies will offer substandard rates to clients that pose a greater risk to the insurer. This greater risk could be due to things like being overweight, having diabetes, etc. When offered a substandard rate, applicants will have to pay a premium that is more expensive than the standard rate by a certain percentage. For example, if a client was quoted $50 per month for a term policy, and was given a substandard rate of 150% because they were slightly overweight, they would have to pay approximately $75 per month to keep the policy.

Decline
In the worst-case scenarios, insurance companies can decline coverage if they feel your health is too much of a risk to insure. If this is the case, there are still options for non-medical life insurance products that you can apply for, but the rates will usually be expensive and the coverage can sometimes work on a deferred basis (see my previous article on No-Medical Life Insurance).

While we as licensed agents can give you an idea on what kind of rates you might be looking at when you apply, it is never certain until you go through the underwriting with the insurance carrier and receive an offer.

Article written by: Mike Castagna