Gauging Life Insurance Premiums

Your life insurance premium is determined in a variety of ways. Once you receive an initial quote, the process is just beginning. After you sign an application for life insurance through a specific carrier, the life insurance company will assign your application to an underwriter, who will then assess your risk based on your health, age, and the average life expectancy of your cohort.

Some of the processes the underwriter will go through normally involve the following:
An assessment of your medical exam for abnormal functions;
An examination of what you have disclosed on the application, such as your family medical history and your driving record;
In some cases, underwriters will request additional medical reports. This could delay the underwriting process for up to 2-3 weeks.

After all the information has been gathered, your application will be “scored,” and you will be assigned a premium based on your risk.

Though underwriting guidelines may vary according to the carrier, they generally fall into the same broad categories. “Preferred” risk classifications are for those with a below-average risk of early death. Other classifications could be “standard” (an average risk of death), or “substandard” (someone with an above-average risk of death, but still considered insurable). Your premium will be assigned accordingly. The final premium may be greater than, or lower than, your initial quoted price.

Sometimes, someone is such a high risk through age, medical history, or a high-risk profession – that they are considered “uninsurable” by a given company. However, just because one carrier classifies a person as uninsurable does not mean that that person will be unable to obtain a policy from another company. Classification criteria will vary from company to company, and some companies may specialize in providing high risk life insurance.

While it may be tempting to make yourself appear more attractive on paper to obtain a lower rate, its not advisable to leave important information about your health out of your application. The omission can be discovered at the underwriting stage or worse, lead to the denial of a claim after your death.