What are life insurance policy rate classes?

The information that is collected during a life insurance application is used to determine your individual rate class. The rate class is then used to set your premiums according to your health, age, and other personal factors. Most companies use a standard 4 grade rating classification, Preferred Plus, Preferred, Standard, and Substandard. This makes it easier for insurance agents to calculate premiums, because it condenses the many details of your medical exam and application into a simple to understand rating category.

A Preferred Plus insurance customer is the top of line, from the insurance company point of view. This rating indicates that you are young, healthy, and free of contaminants such as smoking or drugs, and lead a relatively low risk lifestyle. People who have risky occupations or hobbies will not qualify for this rate class.

A Preferred rate class is given to people who are in good overall health, and who do not partake in risky activities or hold risky occupations. This class is indicate that you may have some minor concerns, such as smoking or drinking on rare occasions, but lead an otherwise low-risk lifestyle.

A Standard life insurance rate class is given to the average person. This class includes people with fair overall health, those who enjoy moderate risk activities, or who work in occupations which carry a certain degree of possible danger. Someone who smokes regularly but is otherwise healthy would fit into this category, along with, for example, someone with elevated cholesterol levels.

Substandard rate class is reserved for people in poor overall health, those who frequently smoke or drink heavily, and those who enjoy risky activities or work in hazardous conditions. A Substandard rate class usually means you will pay higher premiums than others, and may limit your life insurance options to high risk insurers which charge much more for coverage than a traditional insurer.