Seniors shopping for life insurance face a lot of uncertainty. Unfortunately, the stigma of aging comes with the fear of poor life insurance ratings and – even worse – the possibility of decline for coverage.
The good news is you do not have to be afraid to shop for life insurance just because you’re over the age of 55.
We believe that the more you know, the less daunting life insurance shopping seems. Let’s start with explaining the life insurance rating system – including rating categories – and how it applies to seniors shopping for coverage.
What Is A Life Insurance Rating?
Rating refers to a few things in the life insurance industry, namely: financial stability and risk. Companies like Moodys, Standard & Poor and A.M. Best rate life insurance companies based on their financial strength and ability to pay out life insurance benefits. And life insurance companies rate applicants based on their insurability.
Life insurance ratings are grades given by life insurance underwriters. Ratings allow underwriters to take a look at your risk factors, and to provide you coverage accordingly.
How Do Life Insurance Ratings Work?
Life insurance companies look at a multitude of factors when assessing your risk/insurability. Ratings are, in simplest terms, based on the likelihood of you passing away before your life insurance term expires.
This means that life insurance companies will look at everything that makes you a risk, including:
- Your age
- Family health history
- Current health and past health history
- Medications you are currently taking
- Medications you have taken
- History of drug and alcohol use
- Cholesterol levels
- History of DUIs/DWIs
- Tobacco use
- Blood pressure
An underwriter will thoroughly assess these markers, painting a total picture of your risk. Your risk will place you into a rating category, which will factor into what you pay for your insurance premiums.
The important thing to remember is that each insurance company approaches ratings differently. Here we will list the typical rating system, but if you have additional questions about a specific carrier or how you may be rated, please contact us!
The best life insurance rating group is “preferred.” Certain companies may offer “preferred plus” or “preferred best” ratings as additional category choices.
In this category, your premiums will be lower than other categories. Of course, “low” is a relative term, as the size and type of policy you choose will also impact what you pay for coverage.
In order to earn a “preferred” rating, you must meet the following qualification guidelines:
- No tobacco use (some carriers may look favorably upon past tobacco users who have been tobacco-free for at least five years)
- No history of cancer or heart disease
- Meets weight requirements set by the carrier
- Healthy blood pressure
- Healthy cholesterol
- No DWI or moving violations (although past violations may not bar you from this rating. If you’ve had a DWI in the past, give us a call)
- No immediate family history of early death due to cancer or heart disease. Most companies define “early” as 60, or as “early” 65 years or later.
Standard Plus Rating
The next rating group is “Standard Plus.” In a standard plus group rating, underwriters typically view you as being in good health. Your cholesterol and blood pressure will still need to be considered healthy, but a few minor outliers – such as weight, or even past tobacco use – won’t disqualify you from getting a good premium price.
“Standard” is the next rating category. A standard classification defines your risk as comparatively average. One of the primary differences between this category and the Standard Plus category is that your family history will make a huge impact. If you have a family history of early death due to heart disease of cancer in addition to average health, weight, and risk, you will be dropped into the Standard category.
“Substandard” is the final rating. Unlike the other rating categories, Substandard consists of a multitude of rating options, depending on your unique situation. A high risk occupation or hobby, or less-than-average health may place you in this category.
Occasionally, substandard categories are referred to as a table ratings, or “rated” life insurance policies. This category typically works by adding an extra 25% to a standard rating, based on the risks of health or lifestyle assessed by your underwriters.
Age and Life Insurance Ratings
Now, let’s go back to what is considered a “senior” by life insurance standards. For most companies, senior ratings begin at 55…which is relatively young!
Age is only one part of your overall health picture. Age does not automatically have to disqualify you from finding affordable coverage.
So if you are a senior afraid that your age will automatically saddle you with expensive premiums: give us a call! And if you’re reading this panicking because you also have a few health problems: give us a call, or read more of this blog!
We will be covering senior health conditions and what that means for your life insurance costs in other articles (check out our series on Affordable Life Insurance at Every Age).