In an earlier post, we discussed the different underwriting decisions that can be handed out to applicants of life insurance. One of the outcomes is an approval at preferred rates. As the name implies, these policies have a lower premium attached to them, rewarding the applicant for a healthy lifestyle. Qualifying for preferred underwriting is one of the most effective saving methods for life insurance, although it is also one of the hardest to achieve. How exactly is eligibility for preferred underwriting determined? This post will review some of the criteria that insurance companies look at when applying preferred rates.
Classes and discounts of preferred underwriting
There are typically five classes of underwriting: three for non-smokers and two for smokers. Standard smokers and non-smokers receive the standard rate, while preferred smokers and non-smokers qualify for a better price. Elite non-smokers, who exhibit excellent health and lifestyle, are rewarded with the highest premium discount. Different insurance companies have different nomenclature for their preferred rates. Some refer to them as preferred and preferred plus, while others use a number system with 1 having the best rates and 5 having the worst.
|Healthiest lifestyle and highest discount||Class 1||Preferred plus non-smoker||Elite non-smoker|
|Class 2||Preferred non-smoker||Preferred non-smoker|
|Class 3||Standard non-smoker||Standard non-smoker|
|Class 4||Preferred smoker||Preferred smoker|
|Least healthy||Class 5||Standard smoker||Standard smoker|
Without any information about your health and lifestyle, a life insurance broker or agent should quote you with either the class 3 or standard non-smoker rate, or class 5 or standard smoker rate, depending on whether or not you smoke. It’s only after underwriting that the insurance company can offer you the preferred rates.
Most insurance companies only allow preferred rates for face amounts of $250,000 and over. Discounts are usually between 2%-10% for preferred rates and 10%-30% for elite non-smokers, which can lead to savings of thousands of dollars over the life of the policy. Younger applicants will receive the low end of the discount range, while older applicants will be able to save more. Typically, the insurance company will allow you to choose between taking a discount for the same face amount or increasing the coverage for the same premium. The choice is up to you and can simply be indicated on the application.
Factors that affect eligibility for preferred rates
Insurance companies will look at many factors relevant to your health and lifestyle in determining if you’re eligible for preferred or elite rates. Note that each insurance company weighs each factor differently and the following is a general guideline.
Tobacco: You must not have used any tobacco or nicotine products in the past 24 months for elite status, and 12 months for preferred non-smoker status. Any tobacco use within the past 12 months will relegate you to standard or preferred smoker rates.
Build: If you do not exceed the weight for your height, then you can qualify for preferred rates. Build tables vary slightly among insurance companies and are separated into both preferred and elite, and male and female.
|Height (ft/in)||Weight (lbs)|
Blood pressure: A similar table exists for blood pressure, which is separated into age brackets instead of sex. A separate maximum is specified for systolic and diastolic pressure. You must also have never been prescribed medication for hypertension before.
|18-34||Does not exceed 125/75||Does not exceed 130/80|
|35-44||Does not exceed 130/75||Does not exceed 135/75|
|45-54||Does not exceed 135/80||Does not exceed 140/85|
|55-64||Does not exceed 140/80||Does not exceed 145/85|
|65-70||Does not exceed 140/85||Does not exceed 150/90|
|71-85||Does not exceed 145/90||Does not exceed 155/90|
Cholesterol level: Yet another table exists where applicants who exhibit low total cholesterol level and cholesterol/HDL ratio qualify for preferred rates. You must also have never been prescribed medication for high cholesterol level before.
|18-34||Does not exceed 210/4.5||Does not exceed 220/5.0|
|35-44||Does not exceed 210/5.0||Does not exceed 235/5.5|
|45-70||Does not exceed 220/5.0||Does not exceed 235/6.0|
|71-85||Does not exceed 235/6.0||Does not exceed 260/6.5|
Family history: Because of the hereditary nature of diseases, family history plays a important role in the determination of preferred rates. To qualify for an elite rating, there must be no instances of heart disease, cancer or stroke to any member of your immediate family before the age of 65. Immediate family refers to parents and siblings.
Medical history: Similar to family history, you must not have suffered from heart disease, cancer, stroke or diabetes in order to qualify for preferred rates.
Alcohol and drug use: You must not have been treated for alcohol or drug abuse within the past five years to qualify for preferred rates. Elite rates require a longer time period.
Driving record: You must not have a history of impaired driving within the past five years.
Criminal record: You must not have been convicted of any criminal offense within the past five years.
Foreign travel: You have not travelled to an excluded or rated destination.
Avocation: You have not participated in any dangerous avocations within the past two years.
Here is a table showing eligibility for the five underwriting classes.
|Elite non-smoker||No nicotine or tobacco products in the past 24 months. Does not exceed numbers listed under elite portion of build, blood pressure, or cholesterol level table. No immediate family member diagnosed with heart disease, cancer or stroke before age 65. No personal history of heart disease, cancer, stroke or diabetes. No alcohol or drug abuse in the past ten years. No impaired driving in the past ten years. No conviction of criminal offense in the past ten years. No travel to rated or excluded destinations. Have not partaken in dangerous avocations in the past two years.|
|Preferred non-smoker||No nicotine or tobacco products in the past 12 months. Does not exceed numbers listed under preferred portion of build, blood pressure, or cholesterol level table. One or less immediate family member diagnosed with heart disease, cancer or stroke before age 65. No personal history of heart disease, cancer, stroke or diabetes. No alcohol or drug abuse in the past five years. No impaired driving in the past five years. No conviction of criminal offense in the past five years. No travel to rated or excluded destinations. Have not partaken in dangerous avocations in the past year.|
|Standard non-smoker||No nicotine or tobacco products in the past 12 months. No other qualification needed.|
|Preferred smoker||Has used nicotine or tobacco products in the past 12 months. Other criteria remains the same as preferred non-smoker class.|
|Standard smoker||Has used nicotine or tobacco products in the past 12 months. No other qualification needed.|
As you can see, qualifying for the elite underwriting class is the most difficult, with strict criteria that may be out of your control (family history). Only a low percentage of applicants are eligible, and those who do should feel a sense of accomplishment. After all, insurance companies only apply elite and preferred status to low risk individuals, which means that qualified individuals should be expected to live a long and healthy life.
If you currently qualify for the elite or preferred class, it is a good idea to apply for life insurance and lock in your insurability. You never know if a health issue will come up and render you ineligible for preferred underwriting, so it’s never a bad idea to explore the option of life insurance even if there isn’t a current need.
Being issued a policy with the elite rating can lead to savings of thousands of dollars over the life of the policy, so it pays to lead a healthy lifestyle when it comes to life insurance. Do you qualify for preferred underwriting?
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