Life Insurance Quotes: What Do They Mean?
When preparing for the future, life insurance should play a significant role in the big picture. With diversification, the right coverage and some wise assistance from a knowledgeable insurance agent, setting your family up for the future can be relatively painless.
The Anatomy of a Life Insurance Quote
When you apply for insurance coverage, insurers often ask detailed questions that help determine risk. This aids them in setting an accurate quote, based on the likelihood you will die while the policy is in effect.
Some of the information that may be requested in the application includes:
- Age: The younger the applicant, the cheaper the plan.
- Gender: Women often live longer than men, so they pay less for the same or similar coverage.
- Smoking habits: Rates for non-smokers run significantly less than for smokers (due to risk of disease and death).
- Weight: Overweight or obese individuals pay more than those of average or smaller size.
- Family history: The healthier your immediate family, the greater the likelihood you'll remain healthy.
- Current medical history: If you have no major maladies, you'll pay less than others who've contracted illnesses.
- Driving record: Applicants with good driving records are generally healthier and pay lower premiums than those with tickets or accidents.
- Occupation: The more risky the job, the greater the chance of claims—and higher quotes.
- Hobbies: Dangerous hobbies translate into higher premiums.
- Travel plans: Traveling into dangerous regions ups the likelihood of death—and the incidence of insurance claims.
- Credit history: The better your credit rating, the more responsible and stable you tend to be.
Grouping Based on Risk
Though most of these factors are self-explanatory, some people wonder why an insurer would require this kind of personal information when calculating premiums.
Here's why: gathering information on applicants regarding lifestyle, history and vital statistics enables the insurer to group like people together based on risk, then associate a general premium cost for each group as a whole.
Called rate or health classifications, applicants usually fall into one of the following groups.
- Preferred Best or Super Preferred: Take no medications, proportionate height and weight, no major health issues, clean credit and a stellar driving history.
- Preferred: In good shape physically, but may be on a medication or two. May be slightly overweight, but other risk factors are minor.
- Standard Plus: Slightly above average health wise, but may have some adverse family history, or may have quit smoking recently.
- Standard: Average. Most of those with weight issues are classified standard, as are those who quit smoking less than three to five years ago.
- Preferred Tobacco/Standard Tobacco: All smokers are placed in this category, no matter how healthy otherwise.
- Table Ratings: Those not qualifying for a more favorable quote. Includes people with diabetes, cancer, obesity and other serious illnesses. The lower the table rating, the higher the insurance quote.
Generally, the lower the group's overall risk, the lower the quote.
For the cheapest quote, stay healthy, reduce risk, and buy the right life insurance plan today. It makes a great addition to financial portfolios, and helps ensure the successful future loved ones need.