Understanding Life Insurance Rate Classifications
When you apply for a life insurance quote online
, or when you are filling up a life insurance policy application form, you will be asked which rate class you wish to apply for. What exactly is life insurance rate? It is the price you have to pay monthly, quarterly or annually for life insurance coverage.The underwriting process and life insurance rate classes
There are several rate classes, and every person who applies for life insurance wants to qualify for the best rate class so that their premiums are kept low. However, other than going over the criteria for different rate classes, and determining which one you qualify for, there is little you can do than hope that you qualify for a good rate class.
The rate class is determined after an underwriting process. During this process, the outcome of your physical exam, along with supporting health and other documents, your driving history, family health history, your age, sex, lifestyle habits and the nature of your profession is scrutinized closely. Remember never to lie on your life insurance application because if your lie is unearthed, it could permanently affect your chances of getting a life insurance policy. The worst-case-scenario would be if your lie is discovered after you are dead and gone and the life insurance company, would rightly, refuse to issue any pay-out benefits to your family. Based on the scrutiny, the underwriters come to a conclusion about your likely life expectancy. The longer you are expected to live, the better your rate class will be.
Different rate classes and their qualification criteria
Life insurance buyers should spend some time understanding the qualifications associated with the most common rate classes so that they can apply for the right one. Doing so will assure them of an appropriate rate quote, and prevent disappointment later on. Remember that qualifications will vary to some extent between different companies. However, let's take a look at common criteria in each category.Preferred-Plus Term Life Insurance Rate The criteria to qualify for the 'preferred-plus' life insurance rate requires that you cannot use tobacco in any form, have no history of drug or alcohol abuse, and you cannot engage in any hazardous activities. According to actuarial tables, these are the people who are likely to live the longest, and therefore qualify for the lowest available premiums.Preferred Life Insurance Rate Most life insurance companies require that you are in excellent health, and do not participate in hazardous activities in order to qualify for preferred life insurance rates.Standard Life Insurance Rate People who have minor health problems like cholesterol or someone who is moderately overweight will most likely qualify for these rates.Substandard Life Insurance Rate - "Substandard" risks refer to persons who have major health problems. Since their longevity is in question, most whole life and term life insurance companies charge higher premiums on them, so that they recover their costs faster.Remember that even if you are in the best of health, there is a chance that you wont qualify for the best rate class, because underwriters look at several factors in tandem before coming to a conclusion. In fact, only 5%-40% of all applicants get this "preferred-plus" life insurance rate. Typically, about 60% can qualify for the regular "preferred" life insurance rate. The rest, fall into the "standard" category, or below.
With a little effort you can improve your rate class
A person may qualify for standard rate with one life insurance company, but be in the preferred rate class with another. Unless a person shops around extensively for life insurance, or knows the intricacies of each life insurance companys rate class criteria, it is very difficult to individually get in touch with a company which will offer you a better rate class. The solution to this is to get in touch with an online life insurance agency that deals with thousands of policies every year. Such companies have a database of life insurance companies, and they closely monitor each companys criteria so that they can offer the best advice to every customer. Getting in touch with them is sure to improve your chances of getting a better rate class.
You can also attempt to qualify for a better rate class by stopping tobacco usage, losing weight, exercising, driving more carefully, etc. Sometimes only a small change is required to qualify you for a better rate class.
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