Life Insurance Rating Classes (Terms Explained)

Life insurance rating classes are different levels of life insurance policies. Your health condition determines the class rating insurance policy. The better your health condition, the less money you’ll pay life insurance.

When you start the journey to purchase a life insurance policy, you are very likely faced with the dilemma of which rating class to apply for, such as selecting preferred life insurance or substandard life insurance.

What do these mean, and where do you fit? Understanding term life insurance rating classes and what they mean to the life insurance company and, more importantly, your wallet, is an essential part of feeling secure with your new policy.

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What is a class rating insurance?

What is a class rating in life insurance? A rating class is a risk category assigned by life insurance companies during the life insurance underwriting guidelines.

According to the National Association of Insurance Commissioners (NAIC), life insurance is a financial cushion for family or close friends if a policyholder passes away unexpectedly or unexpectedly.

When you apply for a policy, the company will evaluate your application and place you into one of the several risk categories depending on your circumstances, such as current health, medical history, and family history.

Your rating class is based on your mortality risk or risk of being susceptible to death.

Life insurance company actuaries determine the risks that will put you into a specific rating class.

Life insurance companies have several ways to determine rates, often called life insurance health classifications, life insurance risk class, or life insurance health classes.

Information used to determine a rating class includes current health, medical history, family history, and participation in dangerous activities.

There are many mathematical equations and statistics behind the mortality tables used to determine mortality risk.

And while you may have a family member who lived to be 100 while smoking, drinking, and eating bacon cheeseburgers for breakfast, actuaries consider this to be an anomaly.

Continue reading to learn more about life insurance rate classes (also known as life insurance underwriting classes).

What are the various class ratings?

Life insurance companies assign the following life insurance risk categories for rating classes and new policies.

• Preferred Plus (also known as Preferred Best, Super Preferred, Premier & Elite)
• Preferred
• Standard Plus (also known as Select)
• Standard
• Sub-Standard (also known as Tables A-H)

Many people think the Preferred Plus life insurance rating class is considered the average rating class and feels somewhat offended if this is not the rating class they are assigned.

Try a different company if you’re looking for a Preferred Plus underwriting class or rated insurance policy.

Super Preferred life insurance is the best Preferred life insurance health ratings, which available to nonsmokers.

Life insurance companies will tell you which insurance rate class you can obtain.

Standard vs. Preferred Life Insurance

In reality, the Standard rating class is given to people who have an average mortality risk. If you have an above-average mortality risk, you may be approved at the Standard Plus, Preferred, or even Preferred Plus rating classes.

As you may have guessed, your term life insurance policy’s price will go up as your mortality risk goes up.

Preferred Plus will be the least expensive, and Sub-Standard classes will be the most costly. If a rating class cannot be approved based on your mortality risk, the life insurance company will decline to issue it.

What rating class will I get?

It doesn’t matter which rating class you apply for; the company will approve you at the best rating class. It can be frustrating when you use it for Preferred Plus and are approved at Standard.

Life insurance preferred rating is assigned if you have good health, have an ideal weight to height ratio, and have a good health history.

On the flip side, you would feel pretty good if you apply for Standard and are approved at Preferred Plus—one of the best class insurance policies. Don’t worry too much about what rating class.

The approved rating class that the life insurance company gives at the end of the application process matters.

While you may not control some aspects of your mortality risk (family history), you can control the life insurance company you choose to apply.

An experienced agent can help you select the best company for your specific circumstances, because it is possible to get life insurance with a medical condition.

Have you ever been given a term life insurance rating class you did not expect? Let us know about it!

Our representatives field many customer questions each day, but one common theme tends to be the rating or risk classes that life insurance companies use to classify applicants.

While a detailed review of rating class structures and their role in underwriting is probably not well suited for this blog, a summary of the basics should suffice.

Let’s examine the class structures and how much they would cost per month and per year.

Smokers will pay hundreds more for life insurance because they’re more at risk of terminal illnesses. Each classification rate depends on the severity of a policyholder’s condition.

According to the Centers for Disease Control (CDC), more than 480,000 people die per year from conditions that come from smoking.

Most life insurance companies use a basic hierarchy system; however, each company uses its unique terminology, making it somewhat confusing for consumers. A standard structure looks something like this:

• Preferred Plus (aka Super Preferred, Preferred Best, etc.)
• Preferred
• Standard Plus
• Standard
• Substandard or Rated classes (usually called Table rated)

Naturally, premiums are driven off these rating classes. Preferred life insurance rates are lower than Preferred, which is lower than Standard Plus, and so on.

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How Insurance Companies Determine Rating Class

Our online quoting systems include functionality that helps classify users within one of these classes to present a more accurate initial quote.

By talking with applicants and reviewing applications, our representatives strive to submit all applications at the most appropriate rating classes, based on the information available. This is commonly referred to as field underwriting.

Case Studies: Understanding Life Insurance Rating Classes

Case Study 1: Preferred Plus vs. Substandard

John, a 45-year-old non-smoker in excellent health, applies for a life insurance policy. After a thorough evaluation of his health records, he is assigned the Preferred Plus rating class. As a result, John qualifies for the best rates and pays lower premiums due to his low mortality risk.

On the other hand, Sarah, a 50-year-old smoker with a history of medical conditions, applies for the same policy but is assigned the Substandard rating class. Consequently, Sarah’s premiums are significantly higher due to her increased mortality risk.

Case Study 2: Standard vs. Preferred Life Insurance

Mark, a 35-year-old individual with average health, applies for a life insurance policy. After the underwriting process, he is assigned the Standard rating class. This class reflects his average mortality risk, and Mark pays premiums accordingly.

However, Lisa, a 40-year-old applicant with above-average health, is approved for the Preferred Plus rating class. Lisa benefits from lower premiums compared to the Standard class due to her lower mortality risk.

Case Study 3: Unexpected Rating Class

Emily, a 30-year-old applicant, applies for a life insurance policy and expects to be approved at the Preferred rating class. However, based on the underwriting assessment, Emily is assigned the Standard rating class. Although she anticipated better rates, she still receives coverage at the Standard class, albeit with slightly higher premiums.

Case Study 4: Impact of Smoking

Alex, a 50-year-old smoker, applies for a life insurance policy. As smoking is associated with higher mortality risk, Alex is assigned the Substandard rating class. Consequently, his premiums are considerably higher due to the increased health risks associated with smoking.

Life Insurance Rating Classes: The Bottom Line

The important thing to remember is that regardless of what rating class is quoted initially or written on the application, the insurance company will determine the most appropriate rating class through underwriting and then issue the policy at that class.

This works both ways. For example, if you submit an application at a Preferred rating class and only qualify for Standard based on underwriting, the insurance company will give you the Standard rating class.

However, if you are eligible for Preferred Plus (better than applied for), you will get the Preferred Plus rate.

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