Life Insurance: Rated Classification Basis Explained

Life insurance classifications are based on an individual's health history, lifestyle choices, and medical exam results. These classifications are used by insurers to set policy premiums and determine how much an individual will pay for coverage. The different classifications include Preferred Plus, Preferred, Standard Plus, Standard, Table Ratings, and Tobacco/Smoker Ratings. An individual's risk classification is determined by reviewing their medical history, lifestyle choices, occupation, and family health history. This information is gathered through a process called underwriting, which may involve a medical exam, a review of medical records, and personal interviews.

Preferred Plus: Lowest rates for those with excellent health, no tobacco use, and no serious family health history

Life insurance is a complex topic, but understanding how it works can help you get the best deal. When you apply for a life insurance policy, you will be placed into a risk category or rating class. This is based on your health and lifestyle choices, and it determines how much you pay for your policy – also known as your premium.

The healthiest people with the safest lifestyles are placed in the lowest-risk categories and, therefore, pay the lowest rates. There are several rating classes, and while the names differ between companies, the categories are generally the same.

Preferred Plus

Preferred Plus is the best rating class available. It is reserved for people in excellent health with no tobacco use and no serious family health history. People in this category are considered the lowest risk by insurers and, therefore, receive the lowest possible rates.

To be eligible for Preferred Plus, you must meet certain criteria. These are some of the requirements:

• No tobacco use for at least three to five years.
• A normal weight for your height, with a Body Mass Index (BMI) of 18 to 29.
• No serious health issues. You may have one or two well-controlled or resolved minor health conditions.
• No family history of serious health problems, such as cancer or heart disease before the age of 60.
• A clean driving record with no DUIs or more than two moving violations in the past three years.

If you meet these criteria, you will likely be placed in the Preferred Plus category and receive the lowest rates for your life insurance policy.

How to Get a Better Rating

If you want to improve your health classification, there are several things you can do:

• Apply early. The cost of life insurance increases by around 4.5% to 9% every year you delay applying.
• Address any health issues. Getting a health condition under control or resolved can lead to a better classification.
• Quit smoking. Tobacco use significantly impacts your health rating, and you must be tobacco-free for at least one year to five years to qualify for non-smoker rates.

Preferred: Second-lowest rates; good health, but with minor issues or a family history of health problems

Life insurance classifications are based on an individual's health history, lifestyle choices, and medical exam results. These classifications are used by insurers to set policy premiums and reflect how risky an individual is to insure. The classifications are also used to determine how much an individual will pay for coverage.

The "Preferred" classification, also called "Non-Tobacco/Non-Smoker Preferred", is for individuals who are in good health but have minor issues or a family history of health problems. This classification has the second-lowest premiums. Applicants assigned to this class typically have a height-to-weight ratio within the company's "Preferred" range. They may have one or two well-controlled or resolved minor health conditions and no deaths in their immediate family from heart disease or cancer (although some carriers may allow one death in the immediate family from these conditions).

The "Preferred" classification is just a notch below the "Preferred Plus" rating, which is the healthiest classification. Individuals in the "Preferred" category might have a slightly higher weight for their height, some health issues in their family, or a few small health problems. They will likely still pay relatively good rates for insurance.

The specific requirements for the "Preferred" classification may vary depending on the insurance company. Generally, this classification is for individuals with excellent overall health who do not participate in dangerous activities. Medications for blood pressure and cholesterol are typically allowed, and family history guidelines are slightly more lenient.

It is important to note that each insurance company has its own criteria and classifications, so it is recommended to compare rates from different companies before choosing a life insurance policy.

Standard Plus: Good health, but with more health problems or a poorer family health history than the 'Preferred' category

Life insurance classifications are based on an individual's health history, lifestyle choices, and medical exam results. The classifications are used by insurers to set policy premiums and determine how risky it is to offer an individual a life insurance policy. The Standard Plus rating class falls within the third-lowest premiums.

Individuals who fall within the Standard Plus category are generally in good health but have more health problems or a poorer family health history than those in the Preferred category. They may have a height-to-weight ratio that falls within the company's Standard Plus range, typically with a BMI of 32 or 33. They may also have well-controlled or resolved mild-to-moderate health conditions.

Standard Plus applicants may have a family history of health issues, such as one death from heart disease or cancer in their immediate family. They may also have slightly higher weight-to-height ratios than those in the Preferred category.

The Standard Plus classification is considered riskier than the Preferred and Preferred Plus categories, resulting in higher insurance premiums. Individuals in the Standard Plus category can expect to pay more for their insurance than those in the Preferred group due to their increased risk profile.

It is important to note that insurance companies may have different criteria for determining an individual's classification, so it is recommended to compare quotes from multiple providers to find the best rate.

Standard: Average health and weight; some health issues and a family history of health issues

Life insurance classifications are based on your health history, lifestyle choices, and weight. They are used by insurers to set your policy premiums. The standard classification is for people with average health and weight. This classification includes people who:

• Have some health issues.
• Have a family history of health issues.
• Are taking multiple medications.
• Do not fit within the published life insurance height and weight chart.

The standard classification is also called the Non-Tobacco/Non-Smoker Standard classification. It comes with the fourth-lowest premiums. Applicants who get standard rates have a height-to-weight ratio that falls within the company's standard range. Most people with a BMI between 34 and 38 will fall into this range.

People are often rated as standard if more than one of their immediate family members has died of heart disease or cancer. Other factors that will generally result in a standard rating include:

• Having quit smoking one to two years ago.
• Being in recovery from some substances.
• Having a non-violent felony on your record (and being off parole).

The standard classification is for people with average health and a normal weight for their height. The cost of insurance is higher for people in this category than for those in the Preferred or Standard Plus groups.

Substandard: Significant health issues; family history of health complications

Life insurance companies use health classifications to determine the premiums that policyholders will pay. Typically, there are six categories: Preferred Plus, Preferred, Standard Plus, Standard, Table Ratings, and Tobacco/Smoker Ratings. However, the specific classifications and requirements to qualify for each class differ across insurers.

The "Substandard" classification is for individuals with more significant health issues and a complicated family health history. People in this category pay higher premiums because they are riskier to insure. Insurers will scrutinise an applicant's medical history, lifestyle choices, occupation, and family health history to evaluate their risk level.

When it comes to family health history, insurers are interested in critical illnesses like cancer, heart disease, kidney disease, and diabetes, as these conditions can be hereditary and impact longevity. For instance, if a parent was diagnosed with heart disease at a young age, it increases the likelihood of their child developing the same condition. Insurers consider this when setting premiums since treating these illnesses is costly and may result in future claims.

Additionally, insurers also take into account the average lifespan of close relatives. If family members tend to live long lives, the insured's risk of dying prematurely is lower, reducing the insurer's risk and potentially resulting in more affordable premiums.

It is important to note that while family history plays a role in life insurance rates, an individual's personal health profile and age are typically more significant factors in determining the cost of premiums. Being transparent about one's family health history is crucial when applying for life insurance. Failing to disclose relevant information could lead to claim rejections or policy cancellations.

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