When applying for life insurance coverage, an applicant’s health is certainly an important factor in making a determination as to whether or not to approve them for coverage – and, when someone has an adverse health issue, it could deem them as being a “high risk.”
But, just because someone falls into a higher risk bracket doesn’t mean that they won’t be approved for life insurance. While most people typically fall into the policy categories of “Standard” or “Preferred,” those who have pre-existing health conditions and are considered to be a higher risk will most likely receive a “Sub-Standard” rating.
High Risk Life Insurance
Obtaining life insurance when you have various health conditions can be difficult. Any time that an applicant has an ailment that could have an effect on his or her life expectancy, it will a
lso impact their ability to qualify for coverage. This is because they are seen as more of a risk to the insurance carrier.
While all life insurance companies consider an applicant’s overall health when underwriting a potential insured for coverage, insurers will oftentimes use different methods for qualifying individuals. Therefore, while one company might outright reject someone for coverage, another may accept them.
This is why it is important to know what insurers look for when underwriting an application, as well as to be as detailed as possible when submitting an application for coverage, as it could truly make the difference between securing long term financial protection for your loved ones or not.
Smokers versus Non-Smokers
In addition to an applicant’s health condition, life insurance underwriters will also take a close look at lifestyle and hobbies. One of the most pertinent of those hobbies that can affect life insurance rates is smoking.
Smokers can often pay more than double what non-smokers pay for life insurance. This is mainly because smokers have shorter life expectancies and the insurer anticipates that it will have to pay on the policy much sooner than they would for a non-smoker.
Understanding Life Insurance Ratings and Table Rates
Everyone who applies for life insurance is assessed for coverage. Insurers provide coverage and premium rates in accordance with an applicant’s risk level. To that end, insurance companies typically place applicants in categories that are relative to their risk – which involves their health, as well as their lifestyle choices.
Upon completing an application for life insurance coverage – and, if required, completing a medical exam – an insurer will analyze the information and determine whether or not to accept the individual for coverage. If so, they will fit the individual into a classification or category.
Although all insurance companies usually have their own versions, most will have some variation of the following policy categories:
- Preferred Plus – Sometimes referred to as preferred elite, super preferred, or preferred plus, this category is associated with excellent health, a normal weight and height profile, and no other factors that might suggest increased health risk such as the death of a family member due to heart disease before age 60, for example.
- Preferred – This category is associated with excellent health, although there may be a few minor issues like a slightly elevated cholesterol level, for instance.
- Standard Plus – While associated with optimum health, there may be some factors that prevent the applicant from falling into a preferred category like high blood pressure or being overweight.
- Standard – This category is associated with average health, as well as a normal life expectancy. Minor health issues may be present or, perhaps, weight is not optimum. Factors such as these, coupled with the death of a parent due to disease before age 60 could also be relative to this category.
- Preferred Smoker – This category is for a person who would otherwise fall into the regular preferred category but smokes. Some insurers will place an occasional smoker in this category.
- Standard Smoker – A smoker who is in otherwise standard health will be placed into this category.
Sometimes there are applicants who do not fall into these categories, yet are still eligible for life insurance coverage. Their health issues or lifestyles may prevent them from falling into a standard classification, but they can still be rated in accordance with their coverage risks.
Insurers call this further classification system a Table Rating system. Instead of preferred or standard categories, the applicant may be given a Table Rating with a number or a letter to designate their rating. Depending on that rating, the applicant will pay an additional percentage if they are approved for a policy.
Table ratings allow an insurance company to further assess an applicant in accordance with their risk level. The rating allows the insurer to provide coverage, but at an increased rate, depending on the applicant’s Table Rating. For example, an applicant that has a Table Rating of A can typically expect to pay the standard policy rate plus an additional 25%. Someone with a Table Rate of G can expect to pay the standard rate plus an additional 175%.
Usually, Table Rates are issued for applicants who have definite health conditions. If the condition is deemed as being stable, then the insurance company will provide coverage and charge the rate that is associated with that applicant’s Table Rating.