How do Life Insurance Companies Evaluate You?
You would be surprised at how many different factors life insurance companies take into consideration to determine your health rating class. Did you know that your job could have an impact on your rating? Did you know that certain hobbies might also impact your rating? Before you apply for life insurance, it is important to get an understanding of the many different factors that insurance companies consider before determining your health rating. Below you will find a list of the factors considered by the insurance company during your application review and a general explanation of health class ratings.
Factors Considered – Your health class rating is a very important component in determining your premiums. Life insurance companies are very good at assessing risk and they take many factors into consideration when determining your health class rating such as:
- Age – Obviously, older applicants will pay higher premiums but some companies are more lenient with older applicants when it comes to various personal health factors like build, cholesterol and blood pressure.
- Gender – Men pay higher premiums for life insurance than women all else being equal.
- Personal medical history – Your overall health rating based on factors such as build, cholesterol level, blood pressure etc.
- Tobacco use – Do you use tobacco products such as cigarettes, cigars or smokeless tobacco products?
- Avocations – Any hobbies that might be considered risky like auto racing, piloting, mountain climbing etc.?
- Occupation – High risk occupations such as oil refinery workers, bridge workers, certain law enforcement etc.?
- Foreign Travel – Any regular travel to high risk countries?
- Immediate family medical history – Any history of cancer or heart disease in parents or siblings?
- Driving record – Any suspensions, moving violations DUI’s etc.?
- Criminal history – Any felonies or other criminal history that might make you a risky applicant?
- Substance abuse – Any issues with drugs or alcohol that required you to seek treatment?
The insurance company will use the factors above as well as the results from your paramedical exam to determine your health class rating. Your age, the amount of insurance, the length of your coverage and your health rating will ultimately determine your premiums.
More about Health Class Ratings: Each insurance company has its own underwriting criteria and rating scale. For instance, some companies might give their best rating to an applicant with normal cholesterol levels that are being controlled with medication while other companies will not. Some companies might name their best rating “Preferred Best” while other might name their best rating as “Preferred Plus”. Here is a sample of how an insurance company might break down its health ratings:
Preferred Plus Non-Smoker – This is rating is for an applicant in optimal health. They have an excellent height/weight ratio, normal cholesterol and blood pressure levels (usually untreated), no occurrence in parents or siblings of heart disease or cancer prior to age 60, clean driving record for the last 5 years, no dangerous hobbies, no tobacco in last 5 years.
Preferred Non-smoker – This rating is a bit more liberal than preferred plus. There is usually a slightly higher threshold for cholesterol and blood pressure levels that will qualify even if being treated with medication. The height/weight ratio is a bit more liberal as well. Sometimes an insurer may allow preferred rates if there is one occurrence of cancer or heart disease in a parent before the age of 60. They may allow two moving violations in the last 2 years or one DWI in the last 5 years. No tobacco or nicotine products for the last 2 years.
Standard Plus Non-Smoker – There might be slightly more liberal height/weight ratios, cholesterol levels and blood pressure levels allowed as well as a personal history of impairments compared to preferred plus. The insurer may allow 3 moving violations in the last 3 years but no DWI’s in the last 3 years. They usually will require no tobacco or nicotine products in the last 12 months.
Standard Non-Smoker – This is reserved for those with average health and normal life expectancy. Height/weight ratios are very liberal as well as elevated cholesterol and blood pressure levels. The insurer may allow one death of a parent from heart disease or cancer before age 60. They might allow 4 moving violations in the last 3 years but no DWI’s in the last 2 years. They will usually require no tobacco or nicotine products in the last 12 months.
Preferred Smoker – Characteristics similar to preferred non-smoker but with use of tobacco or nicotine based products in the last 12 months.
Standard Smoker – Characteristics similar to Standard non-smoker but with use of tobacco or nicotine based products in the last 12 months.
Substandard Ratings: If you don’t fall into any of the health class ratings listed above because of health issues, you will be considered a substandard rating. With “Standard” rating being the benchmark for a normal life expectancy, anything below “Standard” will be a “table rated”. If you are “table rated”, you will pay a certain percentage greater than “Standard Rating”. The severity of your health issues will determine how far down the table you will be rated. Here is how the table rating scale breaks down:
- Table A or 1 Rating: Standard + 25%
- Table B or 2 Rating: Standard +50%
- Table C or 3 Rating: Standard +75%
- Table D or 4 Rating: Standard +100%
- Table E or 5 Rating: Standard +125%
- Table F or 6 Rating: Standard +150%
- Table G or 7 Rating: Standard +175%
- Table H or 8 Rating: Standard +200%
- Table I or 9 Rating: Standard +225%
- Table J or 10 Rating: Standard +250%
It is important which medical impairments might lead to substandard ratings. To learn more about which medical impairments will have the greatest impact on your health rating, click here.