Cost & Coverage
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Your hobbies, health, and even family history are used to determine your life insurance classification
Classifications change depending on the carrier
How you're classified dictates the cost of your premiums
Not all life insurance policies are created equal. The policy you get won’t necessarily be the same policy your neighbor gets. That’s because life insurance companies use a system of classifications to determine someone’s health based on a series of factors about that particular individual.
These classifications can affect how much coverage you can get at each price point. If you’re healthy, you’ll get a more favorable classification and more affordable life insurance rates. If you’re not so healthy, your life insurance classification will reflect that. Insurers want to figure out which of their customers are more likely to die while the policy is in force because those are the policies that the insurer will have to pay out.
Every life insurance company uses roughly the same classifications to determine how much you pay for your life insurance, or life insurance premiums. Although, differently named classifications may have equivalents among other insurers. There may be different rules governing the definition of each classification and how much your life insurance coverage will cost you. For example, while it’s common to receive a less favorable classification for any type of tobacco use, some insurance companies may distinguish between tobacco products when determining your classification.
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In general, there are four different classifications that determine the cost of life insurance policies:
Some companies will have different names for them, but these are the most widely used. People who don’t fit into any other classifications may fall into a broader category, called Substandard.
Finally, as mentioned, some companies will have categories exclusively for those who identify as smokers.
Sometimes called Preferred Elite, Super Preferred, or Preferred Select, a rose by any other name is still the best classification you can get. You’re royalty to an insurance company. You’re in excellent health, you have an ideal height/weight ratio, and your family history is as squeaky clean as your lifestyle.
Well done, you’re paying the lowest premium!
In this case, second place isn’t so bad. You won’t be getting the same deals as a Preferred Plus member but outside of a few minor factors, like high cholesterol or blood pressure, you’re in very good health.
You’re still doing pretty good. You’re in good health, but you might have a few outliers to keep an eye on and you’re not in the ideal height/weight range. Your family history is good, so you shouldn’t have any surprises in your future.
You have a less ideal height/weight ratio, you have an average life expectancy, and your medical exam came back with a few notes. The main difference here is that your family history plays a role, and there are instances of family members having issues with something before the age of 60. You will see high life insurance premiums, but you’re still able to get insured, which is the important part.
This isn’t a specific rating classification like the others; instead, based on your health and history, you’re placed in what’s called a table rating system, graded by either letters or numbers (typically either A-J or 1-10). This is because you have a complicated health history, or you’ve had some recent problems, such as a heart attack or diabetes.
Your premium price will, on average, be the Standard price plus 25% for every step down the table:
You could be paying as much as an extra 250% on your premiums, which isn’t ideal. But again, you can get insured. If you have dependents who are counting on your income and need protection, you’ll still be able to help them in the event of your death.
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You probably knew that your health affected your premiums; after all, when you apply for life insurance, you have to go through an interview process and schedule a medical exam. To further determine your rates, insurance companies will also assign you a life insurance classification. This process is part of underwriting.
Insurance companies look at a wide range of health and lifestyle factors to figure out which classification you fall into. Each insurance company has its own criteria for determining the weight of each factor and how it affects your classification, which is why you may see different quotes from company to company.
Insurers allow some wiggle room for an underwriter to look at other criteria when judging an applicant’s risk, which is called “stretch criteria.” The same study showed that carriers did this primarily to allow flexibility in assigning classifications and to remain competitive against other carriers who might be willing to offer someone better premiums.
Here are some of the most common factors that go into determining one’s classification:
You’ll have to take a medical exam (also called a paramedical exam) and answer questions about your current health status. This includes any prescriptions you’re taking, any medical conditions you have, and how you’re treating those conditions. The insurance company might have also requested an attending physician’s statement (APS) from your doctor to get their point of view on your health history.
The insurance company will take a look at your height and weight to see where you fall within a certain range. Those with an appropriate weight for their height will be rated favorably, while those who are overweight will have a strike against them. The "acceptable" weights vary based on height and are different for men and women.
Keep in mind that insurance companies don’t just look at your current weight, but also at your weight history. Losing weight can help you save money on your life insurance, but not if you’ve lost (or gained) 10 or more pounds within a year of your application. If that’s the case, you’ll only get credit for 50% of your weight change, largely due to the fact that companies are wary of large fluctuations and want to see stability. This ensures that you didn’t lose weight just to get a better deal on your premium and are going to gain the weight back right after you’re approved.
They don’t mention it on the Surgeon General’s Warning, but smoking is bad for your life insurance premiums too. Regular smoking is a major knock, but occasional smoking (like a cigar every now and then), chewing tobacco, and Juuling can also have an effect on your premiums. Vaping is also being judged strictly by insurance companies, with no carriers offering nonsmoker rates for vapers as of 2019.
Having a beer every once in a while won’t affect your premiums, but, when making their classification determination, insurance companies will take a look at whether you abused drugs and alcohol.
While marijuana is now legal in multiple states, many insurers still classify cannabis use with more than a hint of caution. Some life insurance companies may even give marijuana users the same rates as tobacco smokers regardless of legality, but there are insurance companies that also give marijuana users competitive rates.
During an initial evaluation, you will likely be asked to disclose if your family has “been diagnosed with, treated for, or died from heart disease, kidney disease, cancer, or diabetes.” That’s because family health history is a big factor in life insurance classification, although one that is completely out of your control. If your family has a history of illnesses, such as heart disease, it’s a red flag. This will count against you, especially if there’s a history of death before the age of 60.
This is a catch-all category that includes how risky you live your life, from what you do for work to what your hobbies are. If you’re a base jumper, a fan of flying single-engine planes, or a bear wrestler, your chance of premature death is a bit higher than someone who likes to curl up with a nice book on the couch. Unfortunately, that means you will have to pay what is called a flat extra and your premiums will be higher. How much a flat extra will cost you varies for each carrier, but you can expect to pay $2 to $5 per every $1000 you spend on coverage. That means you’ll be spending an extra $5,000 a year on a $1,000,000 life insurance policy.
A risky behavior classification could also include driving history, which involves pulling up your motor vehicle report. If you have DUIs or DWIs on your record, your premiums will be higher. Also, consider grabbing an Uber every once in a while.
A misdemeanor here or there isn’t going to hurt your chances of getting life insurance; it probably won’t even affect the classification you receive. But if you have a felony on your record, you’ll want to wait for as long as you can to apply for life insurance to avoid a standard or substandard classification and high premiums.
If you smoke, insurance companies will typically have two levels to cover you. Due to the added health risks, you’ll pay more as a smoker.
Preferred Smoker. This is just what it sounds like: you’d probably fall into the Preferred classification if you didn’t smoke. This will usually cover occasional smokers or people who use smokeless tobacco.
Standard Smoker. You’d fall into one of the Standard classifications if it weren’t for those pesky cigarettes. If you want the premium savings, you’ll want to kick your smoking habit.
While quitting smoking can decrease the cost of your life insurance rates over time, ex-smokers will originally still see a hike in their premiums. The longer you don’t smoke, the more opportunity there is for your premium rates to decrease. Think of the extra cash in your pocket as motivation to give up smoking cigarettes.
The hows and whys behind life insurance classifications are helpful, but the real question is: How does this actually affect the price of your life insurance? Here’s how the numbers break down if you’re a 35-year-old male looking to purchase a 20-year term life insurance policy for $500,000 in coverage:
|Rating||Monthly Premium||Annual Premium|
|Preferred Plus Non-Tobacco||$23.41||$267.50|
|Standard Plus Non-Tobacco||$40.47||$462.50|
|Standard Non-Tobacco, Table 2||$71.10||$812.50|
|Standard Non-Tobacco, Table 3||$82.03||$937.50|
|Standard Non-Tobacco, Table 4||$92.97||$1,062.50|
|Rating||Monthly Premium||Annual Premium|
|Standard Tobacco, Table 2||$206.94||$2,365.00|
|Standard Tobacco, Table 3||$240.51||$2,748.75|
|Standard Tobacco, Table 4||$274.09||$3,132.50|
You can see how all those lifestyle choices we discussed earlier reflect in the dollar breakdown. Falling from the best classification to the worst would make your policy more than ten times as expensive. And keep in mind that table ratings can go down even further.
Your life insurance classification is the final determinant of how much you’ll pay to protect your family. So how can you get the best life insurance rates?
Apply now. As a general rule of thumb, your life insurance rates increase every year you put off applying, by an average of 8% to 10% a year. The younger you are when you apply, the more money you are likely to save.
Stop smoking. As you saw above, smoking is a surefire way to pay more for life insurance. If you stop smoking, you at least give yourself a chance for affordable rates. In our example, you can save $16 a month or $200 a year just going from the best smoker class to the worst nonsmoker class.
Get healthier. Some of the health factors that affect your classification are out of your control – you can’t do much about your family health history – but there are some steps you can take prior to your medical exam to give you a leg up on the process:
Keep in mind that these tips can be helpful but the best way to earn a competitive classification is by consistently maintaining a healthy lifestyle.
Life insurance companies want to know that healthier living isn’t just a fluke, or that you’re not just trying to game the system for lower initial rates. When it comes to things like quitting smoking or losing weight, you usually have to show changes for a year or two before the insurer will give you lower rates.
Losing weight, lowering your cholesterol, and lowering your blood pressure can all help you get a better classification. Even if you have a chronic illness, that doesn’t guarantee a higher rate; for conditions like diabetes, you should be able to show that you’re managing the disease and taking the proper steps and medication. Insurers view this favorably, and many will work with you if this is the case.
If you are shopping around for life insurance, or you already have a policy and are unhappy with what you’re paying or the amount of coverage you’re receiving, Policygenius makes it easy to compare life insurance quotes and help you find the right fit for your needs. If you’re healthier than you were when you bought your current policy, you could save yourself a lot of money over the next few decades.
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