Almost every insured person in a life insurance contract has gone through the underwriting process of an insurance company. The purpose of underwriting is to attempt to assess the probability that the insured will die at a normal or premature age, and what the life expectancy of the insured person is given large-scale probabilities for people with similar health risks. After gathering the facts on the insured person’s current health, past health, and family history, the insurance company will assign a health rating to the individual.
Importance of Health Ratings
The health rating means everything to the cost of insurance. The lower the health rating, the higher the price of the insurance will be. The higher cost of insurance will have one of two effects for the policy owner. Either it will increase the premiums that the owner is paying to keep the life insurance policy in force, or it will decrease the cash value buildup over time.
Over the long haul, a life insurance policy with a higher health rating will save a significant amount of money, either in premium payments or higher cash values, for the owner of the policy. Anything one can do to increase the health rating prior to the policy being issued should be done.
If you are not in the very top health rating, fear not. Even relatively healthy people are usually a step or two below the highest rating, as this is reserved for the very healthiest amongst us. Sometimes even the healthiest people will not be given a top rating if their family history contains health problems or early death of parents. Insurance premiums are priced to be affordable to the most common risk ratings. Anyone assigned the highest risk rating will essentially receive a bonus in savings for the owner of the life insurance policy.
Risk Classes All Have Own Expected Outcome Based On Mortality (Morbidity) Table
The point of grouping clients into risk classes is to assess the life expectancy of the group average based on statistics compiled into what is known as a mortality or morbidity table. By grouping clients of the same risk together, a more accurate picture of the life expectancy of each class can be calculated. This helps clients in better health save money because they are not subsidizing clients in lower-risk classes.
Risk Class Terminology
Every insurance company has its own terminology and its own risk classification systems. Someone that may only classify for the third-highest risk rating in one company may classify for the second-highest risk rating at another life insurance provider. This is part of the reason that comparison shopping life insurance policies from different life insurance companies can save a policy owner a lot of money. Generally speaking, most life insurance companies use the following terminology for risk classes.
- Premier/Premium/Preferred Plus or Preferred Best– This is generally the highest risk rating, associated with the lowest insurance costs.
- Preferred– This is the second-highest health rating. Most people who you may think of as relatively healthy individuals will fall into this risk rating. Most insurance companies will assign this rating if an insurance applicant has one slight risk factor such as high blood pressure or cholesterol, but usually not if one is extremely high or if multiple factors exist uncontrolled. Generally speaking, the cost of insurance does not rise too sharply for the second-tier rating.
- Standard Plus– This is usually the third-highest risk rating. This class is reserved for people that are fairly healthy, yet may have some risk factors such as high blood pressure, high cholesterol, or be overweight. One or multiple risk factors may be uncontrolled.
- Standard– A standard risk rating is the lowest of the common ratings (non-tobacco). This rating is generally reserved for people who are significantly overweight, have very high blood pressure, or have very high cholesterol.
Tobacco Smoker Ratings
For evidence that tobacco is detrimental to health, look no further than the expense it adds to a life insurance policy. The best tobacco rating may add two to three times the cost of the best non-tobacco rating, and possibly even more! These are the ratings for tobacco users.
- Preferred Smoker– This is for an otherwise healthy smoker, with any risk factors such as high blood pressure well controlled by medication. Generally not overweight, the smokers who obtain this rating would otherwise rate in one of the first two non-smoking health classes.
- Standard Smoker– This is for a smoker who also has other risk factors that are not well controlled by medication. An overweight smoker would qualify for this class most likely.
These are special ratings assigned to people who have a significant risk factor. Not all companies are willing to insure people who qualify for substandard ratings, and comparison shopping is of the utmost importance for people in this health class because costs will be significant and vary widely between life insurance companies. Common conditions that would give a client a substandard rating include a history of heart attack or stroke, diabetes, heart valve issues, being HIV positive, or a history of some highly treatable cancers. Some insurance companies may accept the risk of insuring a substandard client, while others may be unwilling to insure the same person at any price of insurance. Please fill in our quote comparison form if you think you may qualify for a substandard life insurance policy, and we will help you find the best insurance coverage to meet your needs.
Changing Your Health Rating
After a life insurance policy has been issued, it may be possible to improve your health rating. The ability to do this may vary between insurance companies and may depend on the original rating class that was given. The most common change allowed is that from a smoker to a nonsmoker. After being free from tobacco for a certain amount of time (usually 1 year or longer) an insurance company may allow an insured person to either pass through underwriting again or may upgrade the rating class. The effect of this change is usually very pronounced.
Can’t Reduce Rating
A health risk rating can not be lowered once the life insurance policy has been opened, regardless of what happens to the insured person. The risk that health will decrease for some of its policyholders is assumed by life insurance companies, and this is priced into the ratings at issue. Because a health rating is locked in at the time of issue, it is important for people to obtain life insurance early in life when they are healthiest, and the rating will be the highest.
Ratings and Price
While a lower rating will always price a policy higher within the same life insurance company, even a lower health rating may be less expensive than a higher rating at a different company. Because the cost of the same life insurance coverage can vary widely between life insurance companies, we always suggest that our clients at Life Ant compare prices from at least three different insurance providers to obtain the lowest-priced life insurance.
To compare for yourself simply enter your zip code in our quote comparison form. Even if you do not know your exact health rating you can obtain an estimate, and even compare different health ratings between insurance providers.