Assigning a health rating to the insured person is a foundational component of life insurance. The health rating groups people of similar risk together so that the life insurance policy can be priced appropriately. The health rating is assigned through the underwriting processes and is ultimately assigned by the underwriter of the policy.
The purpose of underwriting is to attempt to assess the probability that the insured will die prematurely 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. All people within a health rating are priced at the same level according to their age.
Importance of Health Ratings
The health rating means everything to the price of insurance. The lower the health rating, the higher the price of the insurance will be. Over the long haul, a life insurance policy with a better health rating will save a significant amount of money over those with lower ratings. At the lowest ratings, life insurance can be borderline unaffordable. At the best ratings, life insurance is extremely cheap. Anything one can do to increase the health rating prior to the policy being issued or even after it is issued should be done. The easiest ways to do this are to lose weight and control markers like high blood pressure or cholesterol.
From the big picture perspective, the reason that life insurance works is because a life insurance company can accurately assess the probability that they will need to pay out a claim. Or said a different way, in a large group of people with similar health characteristics the insurance company is able to assess how many people they expect to pass away each year given the ages of the insured people. Health ratings are the way that they can put people in similar groups and assign the same prices to each person in the group.
If you are not assigned the best health rating don’t stress too much. 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. Only the lowest ratings are priced at a level that some may deem unaffordable or not worth the insurance.
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. People should be happy that the life insurance company does this overall. This helps clients in better health save money because they are not subsidizing clients in the lowest 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. Different companies use different variations of this.
- 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
Tobacco smoker ratings are not kind for the price of life insurance. This is because tobacco use raises the risk of dying earlier so significantly. The best tobacco rating may add three to five times the price of a life insurance policy! 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 and this is a very expensive rating.
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.
Improving 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.
Someone could potentially also increase their rating even if they were not a smoker if for instance, they were morbidly obese but later attained a healthy BMI. Typically you will need evidence that improved health has persisted for some time before the life insurance will reconsider a rating.
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.
Ratings and Prices
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.
Worrying about your health rating should not stop you from buying life insurance or going through the underwriting process. Life insurance prices have come down a lot in the past few years, and most people are not in perfect health. If the price is too high, you can still apply to other companies or improve your health and apply to the same company later. Remember, some coverage is better than none, and you can always get a new policy with more death benefit later.