There is absolutely nothing wrong with being approved for life insurance at a standard rate class or higher, unless you qualify for a better rate class through another company. There are a large number of companies that don’t even offer multiple rate classes. Standard is the end result of one of their life insurance applications if it’s approved. It doesn’t matter if you are far healthier than the rest of, or even the majority of the rest of their clients. No preferred rates are available. And if you don’t qualify for their standard rate, they will decline your life insurance application with no option to table rate or add a flat extra.
That type of approach is easy on the life insurance company, but needlessly brutal to customers. Consider for a minute the norm for those companies that offer a full spectrum of life insurance rate classes. For those in the best health you can get preferred plus or preferred elite rates, and if not that then there are preferred rates or perhaps standard plus rates before you get to their standard rate class. The best rate class is priced for life insurance at more or less half as much premium as their own standard rate, a rate that is usually comparable to or lower than the standard from a one rate class company. And if you aren’t healthy enough for their standard life insurance rates because, say, you have a history of type 1 diabetes, they offer coverage at what is called a table rate, each table being 25% above standard. So, if their standard rate for life insurance was $1000 a year, a preferred plus rate would likely be below $500 a year, or a table 4 rate would be $2000 a year.
Needless to say, placing your business with a life insurance company that has options is far better than applying for insurance where the best you can do is pay twice as much as you might be able to qualify for, and if you don’t win you get declined. The argument you’ll hear from those companies who either approve at their one rate or decline you is that the companies that offer multiple rate classes almost never approve you for the better rate classes and are far too quick to table rate you. The reality is that the rates are based on written criteria and most companies approve between 15% and 20% of their applications at their best rate class. Even if you are over 50, 60, 70 or 80, if you meet the underwriting criteria that a life insurance company uses, they will approve you at their best rate class. I have enough in force preferred plus clients who applied and were approved for life insurance in their 70’s and 80’s to be able to bust the myth that older clients can’t get the best rates.
And table rating is a good thing. Those companies that aren’t able to appropriately price a life insurance risk are forced to decline the business. If I have coronary artery disease or type 2 diabetes I don’t want a life insurance company that has already made up their mind that I present too much risk. I want options. Maybe the higher rates mean I can’t have as much life insurance as I would have liked due to budget reasons, but at least I can have some coverage rather than being declined.
Bottom line. Being approved at a standard rate might be appropriate given your health history, but if a company only offers one rate it is almost a sure bet that you can do better by shopping your information through an independent agent. Don’t accept that one rate as fact until you’ve done your due diligence. If you have a policy with a company that only offers one rate class or feel like your standard rate approval was a little brutal, call or email me directly. My name is Ed Hinerman. Let’s talk.