Life insurance health classifications help the insurer determine the monthly premium price of a life insurance policy based in part on the person’s overall health picture.
Table of Contents:
What are Life Insurance Health Ratings and Classifications and Why Do They Matter?
Each life insurance company has a formula to determine which health class a prospective policyholder will fall into. By determining the health class of a person, the insurer is able to more accurately assess the likelihood and timing of a person passing away during the term of the policy.
While there are many variables that go into determining a person’s health class, the main factors that are considered are:
- Age of the person
- Typically, the older a person is when they apply for life insurance the higher their monthly premiums will be. This is especially true for people applying in their 50’s compared to someone applying, let’s say, in their 20’s and 30’s.
- Current health of the person
- Healthy people are more insurable. This doesn’t mean that there aren’t life insurance options for people with underlying illnesses such as diabetes, high blood pressure, etc. It means that people in better health can typically expect lower monthly premiums than people for whom their health has been compromised.
- Past medical history
- People who have had serious illnesses in their past (cancer survivors, Covid-19 survivors, etc) are often still able to obtain life insurance. Again, these past events may contribute to their overall risk and could be reflected in higher monthly premium payments.
- Lifestyle choices and preferences of the person
- Lifestyle choices that may affect your health or may risk your longevity such as smoking and drug use, or dangerous hobbies such as skydiving and scuba diving also have an impact on your health classification. Additionally, your driving record can impact your overall score. If you are frequently in accidents, have a DWI recently, or are recorded as driving recklessly, this may impact your overall rating.
To better understand, let’s look at health classes from the viewpoint of the insurer. In nearly every life insurance policy, the insurer is guaranteeing the policyholder certain cash benefits to their heirs in the event of their death. In order to keep the policy active, or ‘in force’, the policyholder pays regular premiums (usually one payment each month) to fund the policy. Insurance companies maintain low-risk financial portfolios to maximize the money they make off monthly premiums over time.
Health classes help them calculate the risk of each policy. The longer the policyholder lives, the more money the insurer is able to make off the policy before the guaranteed benefit is to be paid.
An insurer must be able to successfully deliver on their promises for all of their policyholders. Each of the main contributing factors listed above helps the insurer determine what their return will be and allow them to continue to honor their commitment to every policy they serve in perpetuity.
What are the Different Types of Health Classifications?
There are 4 main health classifications for life insurance plus an additional category for people who have severe health or health history issues. These classifications are more or less a grading scale that each applicant for insurance falls into. It should be noted that some insurers have a separate category for smokers.
Here are all five categories and what they represent.
Preferred Plus is the ideal health classification associated with lower overall premiums and easier application approval. Preferred Plus candidates have:
- Little to no family health issues
- Have a healthy Body Mass Index (BMI)
- Have excellent overall health
This class is reserved for people who have been both blessed with a healthy family history and have taken good care of themselves throughout their lives. In the United States, approximately 5% of insured people fit into this category.
Preferred is an excellent classification that represents higher premiums than Preferred Plus, but still reaps the benefits of overall good health. Preferred candidates have:
- Minor, non-threatening health conditions
- Are generally in very good health
- Are not overweight for their height
- Have little to no negative family health history
This class is reserved for people that may have health conditions that are treated successfully with medications. Additionally, you may fall into this category if you have otherwise perfect health but perform a dangerous job or hobby on a regular basis. Typically users in this category are very healthy but may have a higher body mass index (BMI) or higher blood pressure and cholesterol than Preferred Plus candidates.
Standard Plus represents people who are generally healthier than the average person. Premiums in this category are typically more than Preferred Plus and Preferred, but are still favorable. People who fall into this category:
- May have a BMI that is slightly over the national guidelines for good health
- May have minor health issues and minor chronic health issues
- Have a limited amount of disease in their family history
The Standard health classification is by far the most commonly assigned rating in the United States. It is a broad category that doesn’t assume you are in pristine health or participate only in non-threatening activities. It does, however, assume that you are reasonably healthy. Standard classification candidates:
- Take more than one medication for health issues
- May be slightly overweight
- May have a family health history that includes diseases such as heart disease, cancer, high cholesterol, high blood pressure, and others
A Substandard classification represents people who may have greater difficulty obtaining life insurance due to an extremely complicated family history of disease or who currently have major health issues. This is why it is so important to apply for life insurance while you are healthy and strong. However, this does not necessarily mean that people in this classification will be denied life insurance. Insurers use a table based on the severity of the applicant’s situation to determine their insurability and resulting premium increases.
The table is represented by letters from “A” to “J” with each letter showing an increase in premium cost. The metric used for these calculations is “Standard + percentage” where “Standard” represents the premium cost of a “Standard” health classification.
In the Substandard table, each subsequent letter increases the premium cost by 25%.
- Substandard A = Standard + 25%,
- Substandard B = Standard + 50%,
- Substandard C = Standard + 75% up to…
- Substandard J = Standard + 250%.
As you can see, premiums for this classification are significantly higher, in some cases many times higher than Standard premiums.
How Does Smoking Affect My Health Classification?
We all know by now that smoking has a negative impact on our overall health and can lead to serious complications down the road. Insurers know this too and have created special classifications to handle smokers who want to purchase a life insurance policy. These categories are as follows:
This classification represents individuals who are:
- Not heavy smokers but rather occasional smokers
- Have quit only recently
- Would otherwise (except for smoking) be considered ‘Preferred’
This classification represents individuals who are:
- Regular or frequent smokers
- Would otherwise (except for smoking) be considered ‘Standard’
Our advice on smoking is simple: if you can quit, do it! Many insurers will have lower rates for people who have been smoke-free for 5 years or more. Additionally, you may find more favorable rates if you are not smoking traditional cigarettes but still using a nicotine patch or gum. But in reality, you should quit smoking for your health, and the sooner you find a way to quit, the better.
What About Vaping?
The jury is still out on vaping when it comes to life insurance. Many companies will still consider you a smoker even if you are using vaping in order to quit. There are a few insurers that may consider you a non-smoker if you are only vaping. Time and research will begin to define this category of nicotine users and we hope for more clarity on the issue moving forward
How Does Each Health Classification Affect My Premium Costs?
Here is a table breakdown of how each life insurance health classification affects the costs of monthly premiums. Here we will look at the four major classifications.
Cost Comparison of Health Classifications
|Preferred Plus||Preferred||Standard Plus||Standard|
|50% Lower than Standard Classification||35% Lower than Standard Classification||18% Lower than Standard Classification||Base Rate|
So, depending on the carrier, a 10-year term life insurance policy for $175,000 for a 40-year-old, non-smoking male could show a monthly premium of:
Real World Costs of Health Classifications
|Preferred Plus||Preferred||Standard Plus||Standard|
|$13.54/month premium||$16.58/month premium||$20.17/month premium||$22.69/month premium
If you are not in your best health, don’t panic. There may be time for you to improve your health classification before you apply for life insurance. You can consult with your doctor or dietician to control the aspects of your health that you are able to control. Obviously, these are personal health decisions that may take time and effort and they should be done to improve your overall quality of life. The good news is that if you want life insurance, there are many options that can fit many budgets. Protection is the name of the game here, regardless of your current state of health.
What’s My Next Step to See if I Qualify for a Life Insurance Policy?
Whether you are looking for a simple Term Life policy to protect you for the next 20 years or you are looking for a more flexible Indexed Universal Life policy with a cash accumulation vehicle, the best first step is to reach out and talk to a knowledgeable, honest insurance specialist. InsureSimpli is a great choice! We are committed to honesty, integrity, and frank, straightforward communication to best help you find the right coverage for your needs.
Feel free to use our quoting engine to determine what your rates might be and which companies offer the best value for your money. Or simply reach out to us by phone or our contact page and we will be more than happy to discuss your options. You are making an important decision by obtaining life insurance. It is a decision that will have a tremendous impact on your family and their finances down the road. InsureSimpli wants to ensure that you and your family receive the care and attention you deserve when shopping for a life insurance policy. Our company was built to serve you. We look forward to hearing from you. Until then, be safe, be healthy, and live your best life!