How Exam Results Impact Policies and Rates
By Victoria Trix
The results of your life insurance medical exam will determine if the initial premium quote your life insurance agent gave you will be honored, or if you fall into a higher risk category and your premium quote will have to be reconfigured based on your new status. If you are categorized as higher risk (which, for example, can result from blood tests showing elevated cholesterol levels) your monthly premiums will be higher.
Underwriter Classifications
Most life insurance underwriters use similar category terms to classify the premium rates of their applicants. The underwriters are the persons affiliated with the insurance company who determine the eligibility of an applicant for coverage. The categories used by underwriters typically break down like this:
- Preferred Plus No Nicotine (Also called Super Preferred)
- Preferred No Nicotine
- Preferred Nicotine
- Standard No Nicotine
- Standard Nicotine
- Substandard
As most policyholders fall into “standard” categories, agents will initially give you a quote for both “standard” and “preferred” rates, noting that you will likely fall into the “standard” category. A health rating of “preferred” indicates that you are healthier than the average consumer and therefore are considered a lower risk and have the benefit of lower insurance premium rates than most policyholders.
An applicant who suffers from a variety of health conditions may be classified as “impaired risk” and considered uninsurable by most carriers. There are specialized life insurance carriers who will take “impaired risk” candidates, but the premiums are much higher.
Perfect Health Not Required
As we all expect to suffer from some type of medical condition as we age, the restrictions of the insurance carriers may make it superficially seem like life insurance is only affordable if you are healthy. This is not the case, since most policy term minimums are set at 10 years and a policyholder who was healthy at the beginning of his policy term cannot be cancelled from the policy due to unforeseen medical conditions later.
Be sure to review the final quotation with your agent thoroughly. Depending on the type of policy you select, you may have the same annual insurance premium for the first 10 years of your term, after which your policy premium will increase annually. There are consequences and benefits of every policy type, which your life insurance agent will explain to you in detail. It is, of course, important that you understand your responsibilities regarding premium payments and any potential they have to increase.