May 23
My life insurance agent said I qualify for “standard rates”. What does this mean?
Life insurance companies use classifications to group you into certain “rate categories.” These categories include preferred plus, preferred, standard and sub-standard.
To get preferred plus rates you must be in excellent overall health. There can be no participation in any hazardous activities and there must be no history of drug or alcohol abuse. You cannot use tobacco in any form. You must have no history of drug or alcohol abuse, and you cannot engage in any hazardous activities.
Preferred rates are a little less stringent. However, you need to understand that when comparing policies, even if you’re in excellent health, there is a good chance you won’t qualify for these best rates. In fact, only 5% – 40% of all applicants get this “super-preferred” rate. Typically, about 60% can qualify for the regular “preferred” rate. The rest fall into the “standard” category, or worse.
“Standard” risks refer to persons who have had some minor health impairments in their lifetime. Examples of standard risks would include persons who have cholesterol levels of over 260, or who are 50 pounds overweight.
“Substandard” risks refer to persons who are having more than minor health problems. Companies charge them additional premiums depending on the risk factors involved.
The specific criteria for these rates differ widely among the various insurance companies, and it is not uncommon for an individual to be classified as “standard” at one company and “preferred” at another.
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