Applying for life insurance can be a harrowing experience for those who are hoping for a superior health classification and the lower premiums that come with such classification. Over the course of the application process, the insurer will measure and identify an applicant’s risk class, or life insurance rate class, by conducting a holistic assessment of lifestyle, health choices, and family medical history.
To those in imperfect health, the life insurance risk classification process represents the cold specter of judgment, trotting out all of one’s subpar lifestyle and health choices for close examination. Despite this, all is not lost for the everyday, flawed applicant. Though the life insurance class rating system may seem unfair – not everything is firmly within the applicant’s control, such as one’s family medical history – there are steps that you can take to minimize the risk of a substandard classification.
As an initial matter, however, it is important that applicants and potential applicants understand the various life insurance health classifications, their requirements, and the consequences thereof.
Life Insurance Risk Classes
When you apply for life insurance, the insurer will assess your risk profile and assign you to a risk class (otherwise referred to as a health class or rate class) which determines your premium rate. In order to make this determination, the insurer has access to your life insurance policy application, health history reports, motor vehicle reports, and may even order a medical exam and specific testing.
The life insurance risk classes can be divided into three primary categories, in order of lowest-highest risk and lowest-highest premiums: a) non-smoker; b) smoker; and c) substandard.
Non-Smoker Health Class
Being in the non-smoker category is ideal, as you are eligible for the lowest premiums. For the insurer, lowering the premiums for non-smokers is a financially safe bet. Non-smokers are much less vulnerable than smokers are to life-threatening health issues.
Under the non-smoker category, there are four sub-categories, in order of lowest-highest risk and lowest-highest premiums:
- Preferred plus
- Standard plus
Preferred plus, otherwise known as super preferred, applies to persons with near-perfect health profiles. People who are placed into preferred plus are in excellent condition with no personal history of significant health issues, meet the preferred plus standard for height and weight, are not currently taking medication, and have no serious family medical history (an early death from cancer, heart disease, or other potentially heritable illness). Only a small portion of applicants qualify for preferred plus coverage.
Preferred coverage applies to those who are typically in excellent health condition with no personal history of significant health issues and no serious family medical history. Generally, those who qualify for preferred have some minor issues that keep them out of preferred plus, such as a slight deviation from the preferred plus height and weight guidelines, or above-average cholesterol level that is being controlled with medication.
Standard plus coverage applies to those who are in reasonably good health, with lab results (such as cholesterol level and blood pressure levels) and a height and weight profile that are below the preferred standard. Family medical history must have no serious events.
Standard coverage is a common risk classification for new life insurance applicants. Despite being so common, however, the standard classification has the highest premiums in the non-smoker category. Applicants who qualify for standard classification may have multiple health issues or health risks – they may be overweight, have elevated lab results, have a condition for which they are receiving medication, or have a family medical history of illness.
Smoker Health Class
The smoker category has two sub-categories: 1) preferred smoker; and 2) standard smoker. Bear in mind that smokeless tobacco use qualifies the applicant for smoker classification.
Preferred smoker coverage is the best classification for a tobacco user to qualify under. They must be in reasonably good health by tobacco user standards, which means that they must meet more stringent height and weight requirements, must have no serious family medical history, and must not have lab results that deviate from preferred smoker guidelines.
Standard smoker coverage applies to tobacco user applicants who – for various reasons – do not meet the more stringent requirements for preferred smoker classification (height and weight, lab results, family history, etc.).
Substandard Life Insurance Classifications
Substandard classification is reserved for those applicants who don’t fall into any of the general non-smoker or smoker classifications. These applicants are considered high risk. Substandard classification is split further into table ratings, which are essentially sub-categories indicating increasingly severe or numerous health conditions or risks. These conditions may include such health issues as diabetes, cancer, heart disease, morbid obesity, high cholesterol, high blood pressure, and risks such as a history of DUI offenses or involvement in combat sports. Essentially, a table rating is meant to account for activities and/or conditions that increase the likelihood of an early death.
Life insurance table ratings are not uniform between insurers. The nomenclature is different from insurer to insurer – some identify table ratings by ascending digits, while some identify table ratings by letter – and the underwriting guidelines may be different as well. As a general rule, however, each increase in table rating typically represents a 25% increase in premiums for the life insurance policy.
Suppose, for example, that an insurer is offering a substandard premium of $150, but has given you a table rating is B (two steps up). The two-step premium increase is 50%. You may therefore be required to pay $225 per month in premiums, given the table rating and risk classification.
Risk classification can be a genuine source of anxiety for many applicants. The standards for classification may appear murky at first glance, and to some extent, the ultimate decision may involve a subjective element. How do you maximize your risk classification and lower your potential premiums, given your profile?
Always Be Truthful
Failing to disclose relevant health and risk information – or even going so far as outright lie – on a life insurance application is an enticing proposition for many applicants. Classification guidelines often seem unfair to the average applicant, and higher premiums are a difficult pill to swallow. Though it is rare for applicants to lie about obvious and significant illnesses, such as cancer or diabetes, it is quite a bit more common for applicants to fail to disclose information or lie about risky lifestyle choices or more minor health issues.
In some cases, lower premiums are a simple fib away. For example, under some life insurance classification guidelines, an occasional cigarette smoker is likely to be assigned a smoker classification with correspondingly higher premiums than the alternative non-smoker classification. Similarly, past recreational drug use may be assessed negatively against the applicant. Were the applicant to avoid disclosing such information, they could improve their chances of securing a stronger risk classification with lower premiums. In reality, however, lying on your life insurance application is a singularly bad idea, as life insurance companies have access to a treasure trove of information on your health history.
Life insurance companies can access Medical Information Bureau reports so as to cross-check your health history with the disclosed information. If necessary, an insurer may even require that you complete a medical exam (that may include highly specific tests, such as drug tests and blood and urine analysis) in order to complete the application process. Finally, if they suspect foul play, insurers may even conduct independent investigations to verify the truth of your disclosures.
Once the insurer determines that relevant information has not been disclosed, or finds that there are outright lies in the application, they can decline the offer or charge a higher premium (after assessing the truthful information). In the event that they discover the failed disclosure or lie post-mortem, they can reduce or even cancel the death benefit of your policy, thereby destroying the core purpose of the life insurance policy.
Best Practices for Avoiding a High Risk Classification
To minimize the possibility of a high risk classification with correspondingly high premiums, consider the following strategies.
Apply as soon as possible
Don’t wait to apply for life insurance. First, premiums go up as you grow older, with the premium increase accelerating in later years. Secondly, your risk classification may be higher if you wait too long. When you are younger, not only are you less likely to have health conditions that lead to a high risk classification, but you can avoid the excessive testing that is sometimes ordered by life insurance companies for older applicants, such as cognitive tests.
Maintain a healthy lifestyle
Maintaining a healthy lifestyle is key to minimizing the possibility of receiving a high risk classification. Tobacco (smoking and smokeless) should be avoided, drug and alcohol abuse treated, dietary habits eliminated, exercise made regular, and stress relief indulged. Taking proper, holistic care of your body will improve the health indicators that insurers assess for determining your risk classification, such as blood pressure, cholesterol level, and weight.
Avoid especially risky activities
Reckless conduct is a surefire way to push up your life insurance risk class. A substandard motor vehicle driving history, for example, may significantly impact your risk classification, and may even result in your application being declined. Reckless conduct is not limited to this sort of “wrongful conduct,” however. Engaging in legal but dangerous activities such as extreme sports can also have a significant affect on your risk classification and may even result in a bonus premium fee on top of the standard fee for your risk class.
Generally speaking, high risk classification and bonus fees are reserved for especially reckless involvement in such activities. Engaging in occasional indoor wall climbing sport may not result in a high risk classification, but regularly climbing dangerous outdoor cliff faces may result in a high risk classification and bonus premiums.