Life insurance rates depending on your health rating class: standard vs. preferred.
Life insurance is a contract between you and the insurer. The insurer promises to pay the policy proceeds to your beneficiary in the event of your death in exchange for regular premium payments.
Through a process known as underwriting, the insurance provider determines the level of risk you pose. When you apply for life insurance, your health, medical history, family history, and other factors are used to assign you a health rating.
There are four main life insurance rating classes:
- Preferred Plus
- Standard Plus
Applicants with severe health issues may be assigned a broader category known as Sub-Standard or Table rating. The higher your health rating (Preferred Plus being the highest), the lower your premium rate will be.
Life insurance companies also have health ratings exclusively for smokers, like Preferred Smoker and Standard Smoker, which have considerably higher monthly premium rates.
Standard vs. Preferred Life Insurance Rates
A Standard rating indicates that you have the same life expectancy as the average person of your age and gender. This health rating is assigned to the majority of people who apply for life insurance. A person in this category may have one or more health concerns, depending on their age.
In contrast, a Preferred rating is given to applicants who are expected to live longer than average based of their age and gender. People with this health categorization are in good health but may have a few small concerns, such as borderline high blood pressure, that preclude them from receiving a Preferred Plus grade.
A Standard applicant will pay more premiums than a Preferred applicant. However, a Standard rating does not impact your ability to get life insurance coverage, it only slightly impacts your price.
How Does a Table Rating Affect Your Insurance Premiums?
Applicants that do not fit into any of the four health classes due to an underlying illness, risky lifestyle, or a dangerous job may receive a sub-standard or table rating. In other words, anything that reduces your life expectancy can trigger a table rating.
You can receive a table rating for both medical and non-medical reasons. These include poorly-managed diabetes, cancer, and a high-risk hobby, like sky diving. You may also receive a table rating for other reasons. For example, if you have multiple driving under the influence charges against your name, insurance companies may approve you with a table rating, regardless of health.
While not a definitive list, here are some of the most common conditions that can lead to a table rating:
- heart attack or stroke
- severe asthma
- type 1 diabetes or uncontrolled type 2 diabetes
- bi-polar disorder
- multiple sclerosis
Applicants with a table rating pay an additional percentage on top of the standard premium rate. Although table ratings may vary from one insurer to the next, they are designated by either numbers (usually 1 to 16) or alphabets (usually A to P). Each number or letter of the alphabet adds 25% on top of the standard life insurance rate.
Monthly premium rate differences for a 20-year term life insurance policy with a coverage amount of $250,000 for a 40-year-old
Monthly premium rate differences for a 20-year term life policy with a coverage amount of $250,000 for a 50-year-old
What Rating Class Will I Get?
The rating class you receive depends on your health, medical history, family history, and lifestyle. Insurers use similar same health rating categories to set your premium rates. However, each may follow a slightly different methodology for assigning those ratings.
Also referred to as Preferred Select, Super Preferred, or Preferred Elite, this is the best rating you can receive. A Preferred Plus rating, which comes with the lowest life insurance rates, goes to applicants who are in excellent health and have a healthy lifestyle, an ideal body mass index (BMI) reading, and a squeaky-clean medical and family history.
You will receive a Preferred rating if you are in great shape but have minor health concerns, like high cholesterol. Preferred rates are very competitive, although they are slightly higher than Preferred Plus rates.
You will get a Standard Plus rating if you are in good health and have a clean family history, outside a few outliers like a slightly higher BMI reading.
Generally, people who are assigned a Standard rating have a similar health profile as those with a Standard Plus classification, but are considered a greater risk because of a family history of one or more diseases. Standard rates are higher than Standard Plus premium rates, but you will likely have no trouble getting approved.
Table ratings (Substandard)
This is not a specific health rating as such; instead, it is a broader category assigned to those who do not fit into any of the four health classifications discussed above. Table ratings are represented by a graded letter or number system.
How Can I Change My Table Rating?
A table rating means you will pay a higher premium rate for coverage; how much more depends on the exact rating.
For example, if you are an ‘A’ table rating, your premium rate will be the standard premium rate plus 25%. For every level you go down the table rating, the rate will go up by another 25%. That means if you are assigned an ‘H’ rating, you will pay the standard premium rate plus 200%.
If the standard monthly premium rate for a life insurance plan is $200, with an ‘A’ or ‘1’ rating, you will be paying $250 a month. With a ‘B’ or ‘2’ rating, the cost of insurance will jump up to $300. An ‘H’ rating will translate into a monthly rate of $600.
It is important to note that most life insurance companies add 25% per number or letter, but some providers may use a different percentage.
If an insurance company assigns you a table rating, there are a few things you can try to get a better deal.
- Shop Around
Every life insurance carrier uses its own health rating system. So, even if you receive a table rating from one provider, another provider might be willing to approve you with a standard rating or with a higher table rating.
As seen above, the rate difference between an ‘A’ rating and an ‘H’ rating is huge. Even a jump of one or two table ratings can translate into a saving of thousands of dollars over the life of the policy.
- Accept and Reapply
Most life insurance companies allow policyholders to reapply a few years after the date of issue if their health conditions improve. For instance, if you have lost considerable weight since you bought the policy, you may be eligible for a better rate.
- Improve table rating
Sometimes, life insurance companies may be willing to negotiate table ratings. If you comply with your medical treatment plan or meet certain lifestyle characteristics, they may improve your health rating by up to two table ratings.
When you apply for life insurance, your health and other variables are used to assign you a health classification. A better health rating classification lowers your life insurance premiums.
A major health problem or a risky activity may not prohibit you from being accepted, but it will almost certainly result in a table rating, which comes with higher premiums. However, each life insurance company has its own own rating system and may assess risk differently.
Regardless of your health, a Dundas Life broker can connect you with the top companies and help you acquire the lowest premium.