When you apply for life insurance, the company needs to assess how risky it is to insure you. This is where life underwriting classes come into play. Life insurance underwriting classes are a way for insurers to categorize applicants based on their health and other factors. These classes help determine your insurance premium (how much you’ll pay for coverage).
Typically, insurers use categories like Preferred, Standard, and Substandard, with each class reflecting different levels of risk and, consequently, different premium rates. For example, if you’re in excellent health, you might qualify for a lower premium in a better underwriting class.
On the other hand, if you have health issues or risky habits, you may be placed in a higher-risk category with higher premiums. Understanding these classes can help you find the best insurance rates based on your health profile.
How Life Insurance Underwriting Classes Works
The life insurance underwriting process is all about assessing your risk to determine your premium. It starts with an application asking for details about your age, health history, family medical history, job, and hobbies. The insurer might also review your medical records, prescription history, and driving record.
For a “fully underwritten” policy, the company looks at all this information, and you might need a medical exam, especially if you’re over 50 or applying for high coverage. During this exam, they’ll check your height, weight, pulse, and blood pressure and collect blood and urine samples. An EKG might also be required.
Based on the gathered information, the insurer places you in a risk class. This class, along with your age and gender, helps determine your insurance premium.
Understanding Life Insurance Risk Classes
Just as I have mentioned above, life insurance companies use different risk classes to determine how much you’ll pay for coverage. These classes include super preferred, preferred, and standard. If you don’t fit into these, you might end up with a substandard rating.
Super Preferred
This is the best class. If you’re in excellent health, avoid risky hobbies or jobs, and have no history of serious diseases, you might qualify here. You must also be tobacco-free for the last five years and have no family history of serious conditions before age 60 or 65.
Preferred
This class is for those in good health but who might have minor issues, like high blood pressure managed with medication or a slightly higher BMI. Well-managed diabetes and certain mental health conditions can also qualify you for this class.
Standard
Most people fall into this category. It includes those with a higher BMI, multiple medications, or some health issues. Your driving record and certain risky jobs are more flexible here, and smoking history is less strict.
Substandard Table Rating
This is for those with significant health issues, like severe asthma or untreated alcohol abuse. These applicants receive a rating that affects their premium but still allows for coverage.
Understanding these classes helps you know where you might fit and what to expect in terms of cost and coverage.
How Your Risk Class Affects Life Insurance Rates
You always need to keep in mind that your risk class directly influences the amount that you’ll pay for life insurance. The better your risk class, the lower your premium will be. Here’s a simple breakdown:
For instance, a 35-year-old woman in the super preferred class may have to pay about $613 every year for a $1 million, 30-year term policy. In the standard class, this can actually increase to $1,192. If you smoke, you may even have to pay more, with rates for smokers in the preferred class at $2,320 annually and $3,000 in the standard class.
Just so you know, permanent life insurance is even pricier. A 45-year-old woman with a $1 million universal policy could pay about $8,800 every year if she’s a nonsmoker. Meanwhile, a smoker might pay $14,348 for the same coverage.
Getting the Best Life Insurance Quote
To qualify for the best risk class and secure the lowest life insurance rates, focus on being healthy and maintaining a clean lifestyle. Here’s how to boost your chances:
- Act Now: Don’t wait to improve your health before applying.
- Avoid Red Flags: Steer clear of actions that might signal higher risk to insurers.
By staying healthy and avoiding risky habits, you can get a better rate on your life insurance.
