Curious about the different risk classifications included in life insurance? Read on to find out more.
Affordable life insurance is one of the best ways to financially protect your loved ones – but even though most life insurance policies are designed to fit into the average household budget, not everyone pays the same amount of money for their life insurance.
There are many factors that affect your life insurance premium costs, including how much coverage you take out and how long you sign up. However, many do not realize that risk classifications of life insurance also play a significant role in their monthly premiums. Nor do they realize that they can improve their chances of falling into a better risk classification by applying for life insurance when they are either relatively young or relatively healthy — or, at best, both.
When you fill out an online life insurance application with an insurance provider, you are categorized into one of several risk factor classifications used by insurers to determine your policy rates. What are these insurance risk classifications, and how can you improve your life insurance risk classification? Here's what you need to know about warranty ratings – and what you can do to get the best possible rating for your life insurance plan.
In this article:
What is the risk classification in insurance?
All insurance involves some form of risk assessment, regardless of whether you take out a life insurance policy, apply for car insurance or insure a family inheritance. Risk classification and insurance management help to keep everyone's policy rates as affordable as possible – but these risk classifications established during the guarantee process also mean that some pay more for insurance than others.
"When someone applies for life insurance and they are approved, their premium is based on their risk classification of guarantees," explains Kristen Wilson, Underwriter Innovation SME at Haven Life. For example, if you apply for a Haven Term life insurance policy, you could end up in one of five risk classifications – and these classifications affect how much you pay in monthly life insurance premiums.
"Haven Life's risk classes are divided into two categories," says Wilson. "Preferred, which is also known as standard, and substandard."
If you are in a standard or preferred class, it means that you are in a low risk category and are likely to pay lower premiums. If you are in a substandard class, it means that you are in a higher risk category – and therefore you may have to pay a higher premium.
What factors determine guarantees for risk classifications?
The life insurance's risk classification used by insurers is based on an applicant's overall health profile – as well as how that health profile can be compared with other people of the same age and gender. "We check the recipe history," Wilson explains. "We're looking at your history of nicotine use, even if you quit." A life insurance company mainly tries to determine your overall health, as well as your potential health risks – and how these risks can affect your overall life expectancy.
If you are applying for a medically insured life insurance policy, expect to provide a family health history as part of your life insurance policy application – and be prepared to conduct a short life insurance medical examination. These personal assessments, combined with sophisticated risk classification algorithms, will help you determine your insurance risk classification. During the warranty process, the life insurance company can look at your personal medical history, your family history and check if you are at high risk for a specific health condition such as heart disease.
Your risk classification will also determine how much you pay for your life insurance. In general, better health correlates with lower life insurance premiums – but you can still get a preferred or regular life insurance rating even if your health is not perfect. "You may have better blood pressure and BMI than average," Wilson gave as an example, "but you may have high cholesterol." As long as your health is better than average, you will probably pay lower premium costs than average.
What is the best risk classification used by insurers?
Haven Life's best life insurance risk classification is Ultra Preferred Non-Tobacco. To obtain this risk classification for warranties, you must be in good health without having used tobacco before in the past year. Believe it or not, the majority of Haven Term policyholders fall into the Ultra Preferred Non-Tobacco rating-in fact, 60 percent of all policyholders received this top-level risk rating from March 2021. These policyholders pay the lowest possible premiums for their lifetime insurance policies. . This chart illustrates the premiums that those in the best life insurance risk rating for Haven Term can expect to pay per month.
If you do not believe that you will qualify for Haven Life's best risk classification group, do not let that deter you from applying for a Haven Life life insurance policy. You can pay more for your monthly life insurance premium, but Haven Life insurances are designed to fit almost any budget. You can even request a free quote to see how affordable your insurance can be.
How can you improve your life insurance risk classification?
If you are planning to apply for life insurance in the near future – you may be considering getting married, for example, or perhaps hoping to start a family in the next few years – it is possible to improve your life insurance risk classification before applying for life insurance. Insurance offers guaranteed level premiums that remain constant under your policy, which means that it is to your advantage to apply while you are relatively young and in good health. The premium you pay today will be the same premium you pay 10, 20 or even 30 years from now, depending on which life insurance policy you choose – so why not try to get the best possible life rating classification and keep that premium as low as possible ?
If you want to improve your life insurance risk classification before taking out a life insurance policy, start by taking a few basic steps to improve your health. For example, if you smoke, you will probably want to quit — especially because nicotine-free for two or more years can significantly reduce your life insurance premiums. If you have high blood pressure or high cholesterol, talk to your doctor about how to reduce these numbers. Even something as simple as healthy eating habits in combination with regular exercise can have a positive effect on your life insurance's risk classification – and do not forget to get good sleep. (Tell yourself that the extra ZZZs will save you $$$.)
What if you do not want to do a life insurance medical examination?
Medically guaranteed life insurance policies generally offer lower monthly premiums than life insurance without a medical examination — but if you are looking for something a little easier than a regular medically insured insurance policy, you may want to consider Haven Simple.
Haven Simple offers a medically signed life insurance policy that … does not require a medical examination. It is a good choice for people who are already in good health and want a quick and easy way to apply for life insurance. For example, new parents may find the Haven Simple app perfect for their hectic schedule – the application can be completed in minutes, you will be notified immediately of your approval status and (if approved) coverage will begin as soon as you make your first premium payment. Keep in mind that Haven Simple tends to be more expensive than Haven Term because insurers will know less about your health.
Just because you choose a policy without a test like Haven Simple does not mean that you avoid life insurance risk ratings. You will still need to answer some basic health questions when completing your Haven Simple application, and the answers to these questions may affect your monthly premium rate. (You must also be honest in your answers, or it may adversely affect your beneficiaries, as the issuance of the policy and the payment of its benefits depend on your answers.) Haven Simple allows you to quickly create your life insurance coverage and protect your near and dear ones. dear from a worst case scenario-but it does not take you out of insurance ratings.
Risk classification and management is an integral part of the insurance purchase process. If you are planning to apply for life insurance in the next few years, see if you can get as healthy as possible before filling out your life insurance application. Not only will you increase your ability to pay lower monthly premiums, but you – and those you love – can also benefit from your improved health. Because taking care of your loved ones is one of the most important reasons to take out life insurance, consider it a win-win.
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