Insurance rating classifications are based on one’s medical history and the results of the medical exam (if one is taken). An insurance company will make an offer (or occasionally decline to make an offer) that reflects their guidelines for a rating class.
Each insurance company is somewhat different. They differ on the names of their classifications and in the requirements to qualify for a rating class. The classifications also differ between term life insurance and whole life plans especially in the extra rating categories. The following can give you some guidelines. Much of the content of these definitions comes directly from major life insurance company rating guides.
Here are some general guidelines:
The best class (lowest rate) from a life insurance company is commonly called Preferred Plus or Preferred Best, also sometimes Super Preferred. To confuse things further, at least one insurance company has a preferred best and preferred plus as a second class.
Here are some of the general requirements for best class (super preferred, preferred plus etc.):
At the next category, commonly called preferred, the requirements become somewhat more liberal such as:
Above the preferred categories are what’s called standard. With some companies, standard is also the category for those who use tobacco. Some companies differentiate between cigarette smoking and cigars and chewing tobacco by not adding the same rate increase for the cigar or tobacco chewer as for a cigarette smoker. This is further complicated in that some life insurance companies have preferred tobacco rates and standard tobacco rates.
The bottom line: Shop! It’s not only the quoted rate. It’s what you can actually get as an offer. Two companies (or more) could give you the same rating class, say Super preferred (Preferred Plus) but you can’t qualify for one but might for the other! On the Lifeinsure.com quoting engine, Company A may quote you $950 per year for Preferred Plus and Company B $1050 but you can’t qualify for Company A! An experienced online broker can help you choose.
When you get above standard rates because of medical history or other history, you might be offered what is called a These are policies that are higher in risk for the insurance company. Here’s where shopping with a good insurance agency with multiple companies becomes imperative. Rated policies are rated according to a table and the extra premium is sometimes called a “Table rating.”
Extra tables go from 1 to 16 (or higher). Not every company goes to 16. Some companies will only rate term life insurance a certain amount and then above that decline to offer insurance. Some life insurance companies use an equivalent letter system as in Table B (equivalent to Table 2) or Table F (Table 6). Each table is a 25% increase in the term insurance rate, so a Table 2 would be 50% more than the Standard rate, Table 4 would be 100% higher etc.
Table ratings for whole life insurance are not quite as drastic. Since these policies are a combination of cash and risk only the cost of the risk is affected by the extra rating so the extra premium for the policy does not rise at the even 25% per table as in term life insurance.