What Are Life Insurance Risk Types?

Posted in Life Insurance

April 9th, 2009

It probably comes as no surprise to you that life insurance companies will assess the risk of insuring your life when they decide to extend a life insurance policy to you. What you may not know is that, during their assessment, they will place you into a broad category of standard risk or preferred risk based on factors like your lifestyle, diet and family history. These life insurance risk types determine what the terms of your policy will be, and even whether you will be receiving a life insurance policy at all.

Most People are Considered Standard Risk Types

Most people fall into what is called the standard risk category. This category is reserved for people who don’t have serious life-threatening health problems, but probably are about average in their diet and exercise routines. If you are near a healthy weight and cholesterol level, and don’t jump out of planes for a living, chances are you will qualify for at least “standard” risk rates. People who are determined to be a “standard risk” qualify for the insurance company’s standard rates. “Preferred risk” individuals qualify for better rates on life insurance, because their health and lifestyle choices pose less of a risk to the insurance company.

How to Become a Preferred Risk Type

How do you get listed as a preferred risk customer? And is it possible to go from “standard” to “preferred,” even if you already have a policy in place? It is possible, with a few healthy lifestyle choices. Quitting smoking, for instance, will greatly improve your risk profile, as will losing weight and lowering your cholesterol. If you are in a profession which requires risky behavior, you may need to be out of that profession for one or two years before being listed as preferred. Some things, like a family history of cardiovascular disease, cannot be changed. But if you keep yourself in better than average health, and can demonstrate improvement over the course of a year, your insurance company may consider you for preferred status.