Applying for term life insurance can seem overwhelming at times. Applicants must figure out the quotes, application forms, phone interviews, paramedical exams… not to mention the policy itself. A good agent or broker can help applicants make sense of the process and the terminology. And that’s what we are doing today, by carefully examining a quote for term life insurance.
What a Quote Is
A quote is simply an estimate of the price you will pay for your term life insurance policy. This estimate is given before the life insurance company has reviewed even a single snippet of information about your health, lifestyle and family history. And for this reason, the quote you receive may be different from the final offer the company makes. This will, of course, depend on the underwriting process, which is simply the review of all the information collected about you.
What a Quote is Not
A quote is not a guarantee that you will be approved, nor is it a promise of the policy premium (cost) if you are approved. An approval by the life insurance company is only made after your formal application, paramedical exam and other information are reviewed by an underwriter. Once your application is approved, the company will make an offer, which includes the approved rating class and policy premium.
One common misconception is the quoted premium is the actual premium you will pay for the policy. While most people do end up with the same premium, in the end, it’s not always so. You shouldn’t consider any quotes you receive to be the final, approved premium until you have your policy in hand. It will clearly state your approved rating class and the price of the policy.
Think of it this way; you can get a quote for any rating class you select. A 70-year old man with diabetes and heart disease could use an online quoting system to get a quote for the best rating class, without disclosing his medical conditions. He obviously would not be approved at the best rating class after the life insurance company reviewed his health history.
Another misconception occurs when an applicant believes an insurance agent or broker can approve a rating class. An agent or broker can only help you estimate what rating class the life insurance company may approve your application at. She cannot guarantee anything on behalf of the company. In the end, it is completely up to the underwriter to determine the final rating class. That being said, an experienced life insurance agent or broker is priceless in helping you estimate your rating class and finding the best company to apply with.
Approved at a Different Rate
Common reasons you may receive a different approved rating class include
- The life insurance company discovered something during underwriting that was not disclosed or known at the time of the quote.
- The life insurance company updated their pricing after you obtained your quote, but before you completed your application.
- You had an age change before completing your application.
- An error was made while obtaining the quote, such as an incorrect date of birth, gender, height/weight, etc.
If you’d like to learn more about rating classes and insurance company pricing, the following blog posts cover this information in more detail.