Did you know only about 15% of applicants ever get the top tier rates for life insurance?
High risk life insurance, also called impaired risk life insurance, accounts for an increasingly large number of those who are applying because, unfortunately, a greater percentage of Americans have a pre-existing medical history of some kind.
As obesity rates have climbed, so have many illnesses which go hand-in-hand. But this type of life insurance isn’t just held to health related issues. Even if you’ve got a good build, exercise and eat right, you might still pose some type of additional risk.
Life insurance ratings can fluctuate from factors stemming from lifestyle choices, financial concerns, criminal activities, and more. The main thing to keep in mind is whether or not there’s anything in your life which might put you in a higher statistical probability to die before your true life expectancy.
If so, you might be a high risk for life insurance.
Understanding What High Risk Life Insurance Really Is…
So, what exactly is an impaired risk life insurance policy and who is it for?
High risk life insurance is for those who exceed a certain level of mortality risk where the issuing carrier might expect a better than average chance to pay a claim before your life expectancy.
Most people who begin their search for life insurance initially don’t even consider themselves a case a higher risk to the carrier. Typically, if you’ve had a blip on your medical history but have since recovered, neither would you.
However, the true long term risks are still there for many different health conditions, so a life insurance carrier must take this into consideration when offering a policy. Even easier to treat conditions can become a big issue several years or decades down the line.
The reason it’s important to identify yourself with an impaired risk life insurance policy from the beginning is because there is greater detail which is required to underwrite your case, and finding the best high risk life insurance company for your specific medical issue is a must!
The first few questions you’ll need to ask yourself, in regards to medical impairments, are:
- Have you been to the hospital in the past decade?
- Do you smoke or use any kind of tobacco products?
- Have you had any surgeries in the past 10 years?
- Are you currently (or have you previously) taking any prescriptions?
- Are you on disability?
A “yes” answer to any of those and you will definitely be asked some follow-up questions. This may not mean you’re automatically a higher risk, but these questions seem to encompass a vast majority of high risk cases.
Other questions, non-health related might include:
- Have you been through any type of financial hardship, like bankruptcy?
- Have you been incarcerated in the past 1o years?
- Do you have any history with drug abuse?
- Do you have any infractions on your driving record?
- Do you participate in any dangerous or hazardous activities or occupations?
- Among your natural parents, brothers and sisters (essentially your immediate family), is there any family history of heart disease, diabetes, or cancer?
As a quick example, someone who went to the hospital from dehydration while running a marathon is probably going to be just fine, assuming the rest of their health is in good order. In fact, there’s a great chance they’re healthier than most because they were competing in endurance races. It was simply a one-off experience.
Minor surgeries are okay, too. Along the same lines as above, an athlete who torn an MCL and required surgery is not in any life threatening danger, nor would they be in the future. Other examples are removals of moles, cosmetic surgeries or elective enhancements.
Third, some prescriptions are perfectly fine, and will not result in any increase in premium or rating. Others might result in severe increases or declines. These are always a case-by-case review.
Last, someone who’s gotten a ticket for rolling through a stop sign on accident, or even gotten a speeding ticket (within reason) is of little concern. Obviously, there are far worse cases, but we’ll get into those a bit later. First, let’s discuss how the ratings change so we can drill down on the different risky areas.
How Impaired Risk Life Insurance Table Ratings Work
Higher risk life insurance policies are finalized a little differently than those which are approved at Standard or better rates. This is because they have higher costs attributed to them.
However, it is not necessarily a linear increase every time. There are three different ways a policy might see price increases:
- Table Ratings
- Flat Extras
- Table Rating + Flat Extra
The easiest way to explain how the prices will fluctuate will be through real examples. For this purpose, we’re going to assume a person who had applied for a policy at a Standard rate, where the policy premium would have been exactly $100 per month.
To illustrate a table rating, it is not too difficult. Each table rating represents a percentage of increase to the base premium (the sample $100). See the chart below:
|Initial Premium||Rating||Increase (%)||New Premium|
As you can see above, it’s a relatively straightforward thing to understand. Unfortunately, you can’t really predict these with 100% accuracy because the final rating is ultimately up to the underwriter reviewing your case. The rating on submission may not be the approval rating.
If a flat extra fee is determined to be appropriate for your situation, the calculation is different. It’s based not on the premium, but the policy details.
A flat extra is an increase in the cost per thousand for a certain period of time. Basically, the fee amount times the number of thousands you’re insuring will determine your cost. Let’s do an example to illustrate:
An underwriter has determined a flat extra fee of $1.00 per thousand is appropriate where Joe Client is requesting a policy in the amount of $500,000 in coverage. The base premium, without the flat extra fee, will be $1,000 per year.
$1.00 Flat Extra Fee x 500 Units of Insurance = $500 Fee
$1,000 Base Premium + $500 Fee = New Annual Premium of $1,500
The good part about a flat extra fee is they can go away after a period of time. Some flat extra fees may last only a couple years, where others could be a decade or longer. On certain occasions where an occupation or hazardous activity have an indefinite end, the flat extra may last as long as the applicant carries on the risk.
There are also instances where the two could be combined, and both a table rating and flat fee extra are both assessed to the final policy premium. This is not as common, as the risk elements for table ratings and flat extras differ, but they could be simultaneous to one person when applying.
Table ratings are more fitting for risks attributed to medical, where flat extras are usually added for anything from DUI’s to those who participate in dangerous activities like salvage scuba diving, hang gliding or piloting (non-health related lifestyle factors).
Best Practices To Securing The Best Rates
If you require high risk underwriting, use an independent agent, period. There is no reason to restrict yourself to one company by using a captive agent, because every single detail could change the outcome of your approval from one company to the next.
Consider putting together a cover letter.
Many agents skip this (we definitely don’t), so you may need to initiate the conversation if you choose another agent, but having a cover letter explaining your situation can truly make a massive difference to the underwriter(s) reviewing your case. Basically, there are factors not mentioned in a doctor’s medical records which could heavily sway the opinion of risk you pose.
As an example, say your doctor had noted “client follows strict diet and exercises regularly.” This sounds great, but might not do much for swaying ratings for your life insurance policy. However, if you were to write a cover letter and explain exactly what you do, and how you eat, you might get positive lifestyle credits (meaning lower ratings and cheaper premiums).
There are tons of examples we could use, but any time you think you can explain your situations more clearly and concise than your doctor (or agent), write a cover letter. It can only help.
If you use us as your agent, we’ll also use something called quick quoting, where we can ask underwriters from several different companies about possible ratings, even before a formal application is submitted. The idea is, why not apply to the carriers who will likely yield the cheapest prices, even before doctor’s orders are required?
See, let’s take diabetes for example. If we know certain aspects of your diabetic condition, like A1C, medications, and your height and weight, we can already start to decipher which companies are better than others, even before considering anything else in your medical profile.
Here are some other tips to save:
- Perform a medical exam, if possible; no exam policies are more expensive, and rarely will a high risk person be given an approval without extensive underwriting.
- Pay annually where possible; paying annually can save anywhere from 5-9% of policy premiums, so it could offset some of the increases you incur.
- Know your numbers; knowing all the details of your medical history, occupation or activities from the start will help your agent match you to an appropriate carrier.
On last thing: consider asking for a reconsideration as often as once per year.
If your situation or health has changed from one year to the next, you can ask for a reconsideration from the carrier annually to see if you may qualify for a lower rate. Your rating can only improve! They will give you the benefit of the doubt and allow you to continue at the better of the two ratings. There’s no reason not to try.
High Risk Health Conditions
When it comes to the medical side of things, there are 10 areas of concern for underwriters, with more specific conditions and illnesses within each category. They are:
- Muscular / Skeletal
- Circulatory / Cardiovascular
- Digestive / Excretory
- Exocrine / Integumentary
- Renal / Urinary
Muscular / Skeletal Conditions
One of the primary systems of your body, the muscular and skeletal systems provide you the ability to move. In life insurance, movement is a key factor to living a long life. However, several types of conditions can restrict or entirely prevent movement, which can correlate to a sedentary lifestyle, considered a mortal risk.
Here are the muscular and skeletal conditions considered a high risk for life insurance:
Circulatory / Cardiovascular Risks
Another major system in the body is the circulatory system, which usually includes the cardiovascular system. These vital systems house the organs responsible for pumping your blood all throughout your body, providing your body all of the oxygen and nutrients it needs to survive, while simultaneously cleaning unused or waste material.
Factors of concern for the circulatory and cardiovascular risks are the following:
- Atrial Fibrillation
- Blood Clots
- Cardiovascular Disease
- Gastric Bypass
- Heart Attack
- Heart Murmur
- High Blood Pressure
- High Cholesterol
- Pulmonary Embolism
The nervous system, another one of the most critical bodily systems, is the conglomerate of nerves throughout your body which pull messages from the brain and deliver them to muscles from your head to your toe. Vital for virtually every conscious action, it’s also responsible for the constant unconscious actions your body is completing every minute, every hour, of every day.
These neurological impairments are most key to high risk life insurance underwriting:
Digestive / Excretory Concerns
Your digestive system is one of they key body systems to providing you energy and cleaning away used substances to make room for more. From your mouth to your intestines and everything in between, the functions of your digestive system allow your body to create usable energy from the food and drinks you consume.
These are the digestive or excretory functions which may cause concern for life insurance approvals:
Endocrine System Threats
One of the smaller systems within your body, it’s an important one. The endocrine system is what helps your body to regulate, develop and grow, metabolize, stay alert and aware, and even allow for reproduction functions to work, all through the use of hormones. From several glands throughout your body, it pushes chemical compounds throughout your body using the circulatory highway in order to increase communication of one system to the next.
Here are the impaired risks taken into consideration within the the endocrine system:
Exocrine / Integumentary Threats
A most visual system, the exocrine systems uses glands, much like the endocrine system, but more towards the exterior parts of your body. Things like your hair, your nails, skin and even sweat glands in your arm pits, are all a part of the exocrine system. Key functions are regulation and protection of other organs and systems.
Here are the high risks for life insurance when considering the exocrine system:
The primary defense mechanism for your body, the lymphatic system carries a fluid called lymph throughout your body via vessels and nodes. This system is your line of defense when your body is fighting illness, diseases, or unknown foreign bodies within your blood, muscles, and organs.
Here are the lymphatic conditions underwriters need to know about:
Renal / Urinary Failures
As your bodily functions go to work for you, they put off waste in several ways, one of which is into the blood system. Your kidneys, the main organ of the renal system, filter the blood of unwanted chemicals or substances, and excretes them through your urinary system. This vital combination of systems is critical to living a long life.
Here are the renal and urinary failures which impact life insurance underwriting:
The reproductive organs, while their primary function is procreation, also play vital roles in working with the endocrine and urinary functions of the body. While not necessarily mandatory to live, certain regulations within the body would be prohibited without this system.
Here are the reproductive system illnesses considered an impairment for life insurance:
Respiratory Function Failure
The respiratory system is the main breath of fresh air for your body, day in and day out… literally. As you breathe, your lungs pull much needed oxygen from the atmosphere, and send it throughout your body through the circulatory system. One of the key systems to survival, it also excrete unwanted vapors, like carbon dioxide, to keep your body at optimum levels at all times, while awake or sleeping.
Here are the respiratory conditions considered as a higher risk for life insurance approvals:
Other Health Impairments (Uncategorized)
Sometimes, an illness or condition is not limited to just one area of the body. It can present itself in one of several areas to begin with, or even more than one at a time. This is where we would classify autoimmune diseases, as they can affect several systems.
They could also be mental issues, where they aren’t necessarily a deficiency or chemical imbalance, and impact the person in several varying ways. Lastly, they could be an illness or condition brought on by strictly environmental factors which impact several systems at once.
Here is a list of health risks which aren’t restricted to a singular system: