Life Insurance Underwriting Explained – Am I Standard or Preferred?

Last Updated: March 31, 2019

Life insurance underwriting can be a lot to take in – and not always the easiest to understand. In underwriting, there’s something known as rate classes. The most common four classes are: Preferred Plus, Preferred, Standard Plus, and Standard. Not sure which one you fall into? Keep on reading.

Quick Article Guide:

1. Standard vs. Preferred
2. Underwriting and Rate Classes
3. What Else Affects Life Insurance Rates?
4. Why You Shouldn’t Wait to Buy Life Insurance
5. We Can Help

What does it Mean to be “Standard” or “Preferred”?

Whenever you apply for life insurance, the life insurance company will evaluate your health and lifestyle to categorize your “risk” or “rate class”.

This is also known as life insurance underwriting.

If you’re been shopping for life insurance or already have a policy, you’ve likely heard of “Standard” rates (most common) or “Preferred Best” (lowest cost “lead pricing”…what you typically see advertised), but what criteria do life insurance companies actually use to determine your rate class?

And if you qualify as a “Standard” or “Preferred” risk, how do you know it’s fair and accurate?

And furthermore, if you qualify for one of these rates, is it better to wait to buy your life insurance, hoping you can get a better rate?

This brief article will demystify the process!

Life Insurance Underwriting and Rate Classes

Rate ClassSince an insurer can’t come back later and change your risk class if you get sick, they’ll take a “snapshot” of your health and lifestyle when you apply for a policy. This determines your statistical mortality risk compared to other applicants in your age group.

If your health is average or better, your rate class will end up as one of the top four risk categories:

  1. Preferred Best/Preferred Plus – These are the most common names used to describe the top health/lowest risk category. 5-8% of applicants qualify at this rate class.
  2. Preferred – The second best rate class available; 12-15% of our applicants are approved at this rate class.
  3. Standard Plus/Super Standard – Above average health or 3rd place. Bronze medal!
  4. StandardAverage risk for someone your age; this is the most common rate class. Nothing to be ashamed of.

If you have some serious health issues, it doesn’t necessarily mean you’ll be “declined”, or turned down. 

Insurance companies have up to eight “sub-standard” risk categories, referred to as “table ratings” in insurance jargon.

The higher your table number, the higher your risk, and the higher your cost of insurance will be.

Example 1:  Well-controlled diabetes is often approved at a “Table 2” rating.

Example 2:  A double heart bypass 5 years ago and currently taking a blood thinner? You’ll be looking at a Table 4 or 6 rating.

Other Than Health, What Affects Life Insurance Rates?

Life insurance underwriting evaluates your mortality risk based on your health and family history, as well as your lifestyle.

Immediate Family History

immediate familyLife insurance companies only look at your immediate family –  your mother, father, and siblings. Your parent’s health before 65 is what’s pertinent; anything after that is considered “natural causes”. Your Term Life Advice agent can help you here – some life insurers won’t ask about cancer, only heart disease, brain aneurism and a couple other factors. Most will overlook “gender-related” cancers; logically, there’s no risk of a woman dying of prostate cancer, and remote risk of breast cancer for men.

Tobacco Use

If you smoke cigarettes, life insurance companies will assign your risk at a tobacco risk class. Expect to pay about twice as much as a non-smoker; as a statistical group, your mortality risk is double.

If you’re using something than cigarettes, you definitely want to speak to a TLA agent. We can match you with a highly-rated insurer that can approve users of chewing tobacco, cigars, e-cigarettes, dip at a non-smoker rate, saving you up to 50%!

Travel to Dangerous Locations

You could have a tough time getting a life insurer to approve your application if you travel to countries on the U.S. State Department’s warning list. The good news is that life insurance is regulated state-by-state, and if you’re lucky enough to live in a “travel exempt” state, you won’t need to disclose future and/or past travel.

Pilot underwritingHazardous Occupations and Hobbies

Life insurance companies will evaluate your occupation and hobbies to determine they’re add mortality risk. Most insurance companies are reasonable. Riding a motorcycle or scuba diving less than 40 feet usually won’t affect rates. Better news? Police, firemen, and other first responders don’t get dinged. If you’re a pilot, you want to speak to TLA. Rates are all over the board, so we’ll be sure to match you to a company treating aviation risk fairly.

Should I Wait to Buy My Life Insurance to Try For A Better Rate Later?

Honestly? Probably not. Procrastination is not your friend. Life insurance rates are based on your age and your health. One of these NEVER gets better, the other rarely.

Each year that passes, your cost for a new life insurance policy increases 5-8% just based on age. Remember, they’re looking at your age at the end of your policy; that’s where the insurer’s risk of paying a death claim is naturally greatest.

Life insurance companies typically round your age to your closest birthday, however, there are exceptions. Many will allow TLA to “backdate” our clients’ new policies 3-6 months if it will help their cost. If you elect this option, you’ll be required to back pay premiums to your “save age” lower age date, so we’ll run projections both ways so you can choose your preference.  Prudential uses actual birth date, so this can be to your benefit if you have a birthday approaching.

Many of our clients tell us they want to lose weight or lower their cholesterol before applying. You know how that goes – great intentions rarely realized. We have a better solution! Allow TLA to help you get your life insurance at your current age. If you are successful losing weight and/or reducing your cholesterol within a few months, we’ll submit your results to your underwriter and can often get a price reduction. Most important, you’ll have peace of mind knowing you’ve protected your family while working on your health.

The sad part of our business is that way too many people don’t act upon securing life insurance until their health has taken a turn for the worse. Many were a “Preferred” risk a year earlier. Now they’re a Table-rated risk, or worse, uninsurable. Don’t make this mistake at the cost of your family’s security.

For Example:

Every life insurance company has its own unique underwriting guidelines, including height and weight charts. One top-rated insurer will allow a 6-foot man to be up to 241 pounds and still consider him for their “Preferred Best” rates!

Prior to calling Term Life Advice, our client had been told his weight was going to drop him down to a “Standard” risk, a cost of nearly $115 per month. Through TLA? His policy cost was $78! Over the 10 year policy term he’ll save $4,400, let alone the joy of telling his buddies he qualified for “Superman” rates!

Another very common health issue our clients bring to us is history of basal, squamous cell, or even melanoma skin cancers. The frequency of the occurrence and location (trunk is worst) and type of treatment is important.

Prostate cancer is another common ailment. Removing the prostate can reduce the cancer risk to nearly zero with some insurers.

We Can Help

The point is, you will greatly benefit by having an expert help you determine your life insurance risk, and which insurers are your best match. Your TLA agent will help paint a favorable portrait for your insurance underwriter, helping you qualify for your most affordable rate class.

Remember, life insurance is regulated, so we can’t charge you a penny for our service, so why go to a rookie when you can have an expert help you?

Give us a call or request a free life insurance quote online, we work with more than 60 top-rated life insurers to provide you the convenience of one-stop shopping.

Call us toll free: (855) 902-6494

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