Explaining The Life Insurance Rate Classes
Today, I want to breakdown the life insurance rate classes so hopefully will it make a little more sense. Life insurance rate classes can be confusing.
Life insurance companies use rate classes to define your risk. The best rate class equates to the lowest the risk-i.e. mortality.
Most life insurers will usually have the same levels of rate classes but will just use different names. For example, Prudential calls their best rate class Preferred Best, while ING ReliaStar uses the name Super Preferred and then American General call their best rate class Preferred Plus. All the same thing, the best rate class, (best rating class = cheapest rate) but are just using a different name for it.
Since every company can name their rate classes something different; let’s look at the common names and rate classes using three of some of the most popular companies-Prudential, ING, and AIG:
- The best rate class available is often called: Preferred Best (Prudential), Super Preferred (ING) and Preferred Plus (American General)
- 2nd best rate class is usually called: Preferred (by most companies)
- Third best rate class is often called Non-smoker plus (Prudential) Select (ING) or Standard plus (American General)
- The next or the average rated risk class is typically called: Standard (ING and American General) or just Non-smoker (Prudential)
The next level of rate classes or risk class below the standard or average risk class is called table rates or substandard rates. Most companies will start a Table B or Table 2 rate class but some companies will start at Table A or Table 1. How high the table rate will go will depend on the company. For example, permanent life insurance products like, universal life insurance can go to Table 16 or Table P and on term life products they will go to Table 8 or Table H, depending on the company. Also, know that not all table rates are the same. Some companies have MUCH better table rates (prices) than other companies. For example, American General (AIG) typically has excellent table rates compared to some other companies.
Also, for smokers, there are usually two rate classes, either Preferred Smoker-tobacco or Standard Smoker-tobacco rate class. These also can be table rated as well.
Which rate class will you qualify for? Well, every company has their own underwriting criteria. For example, if one of your parents had cancer, the best rate class you can qualify for, regardless of your health with many life insurance companies would be a Preferred or even standard plus rate class. While certain companies like ING do not take your family history of cancer into consideration, so if you would otherwise quality you would remain eligible for the Super Preferred, best rate class!
As you can see, with so many life insurers out there and each having their own niche and guidelines, the importance of working with a knowledgeable and unbiased agent are paramount.