There are various risk classifications and factors that enable life insurance companies to put you within a certain rate class. These risks and factors include anything pertaining to health (mentally and physically), family history, lifestyle, and others. The rate or price that you will pay is entirely dependent upon these factors and what rate class that you qualify for. Very similar to car insurance, if you qualify for a better rate class and you are low risk, then your premiums will be much lower compared to others. If you have a poor health history and engage in risky behavior, you will belong to a higher risk class.
With that being said, you may be curious as to what are the most common rate classes. Insurance companies have four primary classes including the following:
- Preferred Plus
- Preferred
- Standard Plus
- Standard
These classes all have certain requirements that are needed in order to receive them.
The Guide to the Most Common Rate/Risk Classes
These lists vary from each insurance company and there is no guarantee as to how you will rank with individual companies based on your health and your family’s health history. Therefore, the factors within each rate class pertain to the following:
- Preferred Plus – Preferred plus usually consist of factors pertaining to excellent health, clean driving record, no history of nicotine, drug, or alcohol abuse, can not engage in dangerous activities (skydiving, race car driving, etc.), and you can not be a felon.
- Preferred – Preferred is just a step below preferred plus, with the only difference having well-controlled blood pressure or cholesterol, which means that you could have issues with this in the past but now have it under control. Other than that, you must meet all of the requirements of preferred plus.
- Standard Plus – Standard plus pertains to having good overall health (above average), minor weight issues, a good driving record, no alcohol/drug abuse, being tobacco-free for a year, minor family health issues, can not engage in hazardous activities, minor blood pressure, and cholesterol issues, and you can not be a felon.
- Standard – Basically the same as standard plus but a step below in terms of health, weight issues, and having a family history pertaining to a loss of one parent or sibling prior to age 60 from health-related issues.
If you are concerned about what rate class you may fall into, there are factors that you can control that may aid you in receiving a higher rate class.
Factors That Affect Rate Class
The factors that can affect your rate class include the following:
- Smoking – A history of smoking automatically makes you ineligible for preferred plus and preferred, which will make your premiums already substantially higher. Cigarette smokers are usually asked to pay 50% more than a non-smoker, and quitting tobacco will help bring your rates down, but only after an observation period. Many insurance companies will wait a year before offering partial rebate and usually a full 3 years before allowing for parity in terms of premium rates. This also applies to individuals that vape.
- Medical Conditions – Having medical conditions pertaining to cancer, cholesterol, asthma, or even depression can disrupt your premium rates drastically. Anything that is indicative of a history of ill health can hurt your chances of receiving a decent insurance premium. Your family history will be investigated as well and certain genetic medical conditions can also hurt your chances of receiving a lower rate.
- Obesity – Obesity by itself will not put you in a lower rate class, but the factors and health conditions associated with it can. Obesity usually leads to heart disease or diabetes, in which this falls into the medical conditions category of deciding a rate class. If your Body Mass Index (BMI) is even slightly over what is considered healthy, your premium rates will reflect this. It is advised to make sure that you are not overweight when going in for a medical checkup and make sure that your recent records do not indicate that you are obese.
- Driving Records – Driving records are taken into consideration because it indicates what type of risk you are. If you are an individual with an abundance of driving infractions, this shows that you are more likely to take risks that may be endangering your life, which shows the life insurance company that they should give you a higher priced premium. Therefore, drive safe and avoid driving recklessly and this will aid in receiving a higher rate classification.
Ultimately, accounting for these factors will aid in enabling you to receive a lower premium and will put you in a higher rate class, ultimately saving you money. While medical conditions are unable to be controlled, factors such as smoking, your weight, and the way you drive can be controlled and can also help in putting you in a higher rate class. While this blog can be beneficial in understanding the rate classes, speaking with a life insurance agent will provide the most thorough insight and will give you a clear understanding of what rate class you will fall into.
