Before we start today, a fast refresher. Life insurance coverage provides financial protection for your loved ones in case of your death. A life insurance policy usually pays a guaranteed amount of money (a death benefit) that can assist your loved ones at a time they'd need it most.
You probably knew all that already, but we desired to recap before addressing the question this article will answer. Basically, when you apply for life insurance coverage, you're put into what's called an underwriting class. Those classes are determined, in part, by your health, your occupation, your hobbies as well as your family's good reputation for illness. That said, they can seem a little mysterious externally, so we wanted to shine a little light on which they are, the way they work, and how they are able to affect you (and the other way around).
Phew. We're glad that's taken care of. Now, let's commence with the light-shining, shall we?
It begins with medical underwriting
To determine a fair price for your policy, your insurance provider will want to know of the current state of the health in a process referred to as medical underwriting. What this means is you'll be asked questions regarding how old you are, weight, height, medical history, your way of life choices, and any other variables that may influence your health. These questions are ultimately used to inform the underwriting process where the insurance company assesses the chance of offering you coverage.
If your insurer determines that you're a low-risk prospect, your premiums will likely be lower than a high-risk prospect of the same age. For those who have riskier health profiles, insurers may charge a greater monthly premium, exclude certain kinds of coverage, limit the quantity of coverage offered, or perhaps won't offer coverage at all.
Every insurer has its own underwriting process. The process of medical underwriting for a Haven Term policy, issued by our parent company MassMutual, looks like the following:
Submit an application
An application is going to be used as a starting place for your overall health. Once an application is submitted online, the information is analyzed in real-time and in contrast to third-party data sources. Often, you will get an immediate decision on eligibility and, if approved, start your coverage that day.
Third-party data sources
Every insurance provider utilizes exactly the same third-party data sources when conducting medical underwriting. This includes the Medical Information Bureau (MIB), prescription history, automobile records and identity verification. These sources do a mixture of verifying the information you reported and help the insurance provider prevent fraud.Medical exam
In most cases, a health check is required for medically underwritten coverage. Often, this can be done at your home, work or a facility – it's up to your preference. This exam can include measurements for height, weight, and blood pressure level; a life insurance blood test, and a urinalysis/drug test. At Haven Life, if a health check is required once the application is submitted, we'll help you schedule it. Pro tip: Consider booking a morning appointment since fasting prior to the exam is usually recommended. For more tips on preparing for the health check, make reference to this helpful guide.
Attending physician statement
Depending on the outcomes of your paramedical exam, your insurer may order an Attending Physician Statement to be able to seek clarification regarding your medical condition. The Attending Physician Statement is really a review of your health condition, written out of your doctor's perspective. This can be useful for a number of reasons. Consider, for instance, if you have hypertension only since you are taking a particular medication that triggers hypertension like a side-effect. You will need your insurance provider to understand this.
Placing you inside a life insurance coverage underwriting class
This may be the last part of the medical underwriting process. Your underwriting class will determine your underwriting rate class, what policy you're offered and at what price.
What is an underwriting class?
An underwriting class is really a way of segmenting people into risk groups. Individuals a frequent rate class pay a lower premium than individuals a standard class for the similar amount of coverage, assuming non-health factors (e.g., age, gender, etc.) are identical. So why do insurance companies/underwriters use rate classes? Doing this allows insurers to have a more granular knowledge of expected mortality for pricing and valuations, and thus to determine the appropriate premium amount based on risk and hang the premium accordingly.
What would be the different rate classes, specific to Haven Term?
Haven Term, the word insurance policy available through Haven Life, offers Standard and Preferred underwriting courses of instruction for both non-tobacco and tobacco users. There are additional classes called Table Ratings that could apply for people with more complicated medical histories, which usually leads to higher premium rates.
How long have insurers used the underwriting class system?
We're so glad you asked! (By “you” we mean “we,” but we digress.) Life insurers have historically been the main thing on a lot of thinking around mortality because the business model depends on understanding those trends. Life insurers introduced tobacco rates within the 1980s because which was identified as one of the biggest stand-alone drivers of great extra mortality. Then, blood testing has been around since the late 1980s, in part due to the HIV epidemic. The supply of more blood panels led to more comprehensive and nuanced underwriting classes.
Do all insurers use the same classes?
No! Most, if not all, use the same concepts of Standard and Preferred, non-tobacco and tobacco, and Table Ratings. But some insurers have more than two preferred classes, or they define current tobacco use differently. And each insurer uses slightly different underwriting guidelines to determine who falls into each class. Companies may have slightly different thoughts about the seriousness of a particular medical condition, so that they might be looser or tighter in the way they measure the risk.
Thus, you might not even get the same class from one insurer to another. So if you possess a complicated medical history, it may be helpful to do a bit of comparison shopping and research prior to making a decision.
What factors determine your class?
There are quite a few things that may impact your underwriting class and for that reason your lifetime insurance premium. So, guess what happens? This implies a bulleted list!
- Medical history
- Prescription history
- Family history
- Life insurance medical exam lab results (in some cases).
- Tobacco use
- Alcohol use
- Drug use
- Driving history
- Foreign travel
- Participation in extreme hobbies like skydiving (works out skydiving is pretty dangerous)
Sometimes, even if you think you're the image of perfect health – you never smoke, you eat right, you work out regularly (your abs have abs), you are able to find themselves in a non-preferred underwriting class. This could occur because of something inside your Rx history or labs that you may not have access to been aware of. Even slightly elevated levels of blood pressure might have an impact, for example. Every case is different, but a great customer service team (which Haven Life has) will usually have the ability to offer you additional information and insight into the factors that impacted your underwriting class.
Can you improve your underwriting class?
As a matter of fact, you can. In some cases, you need to wait for time period before you be reconsidered for any better class. The ways to possibly improve an insurance coverage rate are identical obvious steps you can take to enhance your health overall: Quit smoking, slim down, keep the blood pressure and cholesterol in check, and visit your doctor regularly. Stuff that are probably a good idea even if you're not trying to influence your underwriting class.