When reviewing life insurance applications, carriers will review an applicant’s risk profiles to determine the level of risk associated with offering them coverage. Risk profiles allow insurance companies to assess the probability of an individual filing a claim to determine the appropriate premium for the policy. However, just because an individual has a higher level of risk doesn’t mean they’re not eligible for coverage.
Impaired risk life insurance refers to a type of life insurance designed for individuals with health conditions or lifestyle factors that increase their risk and therefore their premiums. While impaired risk policies typically have higher premiums than traditional life insurance, they offer a coverage option for those who may not qualify for other policy types. In this article, we’ll explore how life insurance companies determine risk to help you determine whether or not impaired risk life insurance is right for you.
How Risk Impacts Life Insurance Rates
Life insurance companies calculate risk by assessing various factors such as age, gender, medical history, lifestyle and occupation. These factors help determine the risk class to which an individual belongs and the corresponding premium rates. The different risk classes are:
Super-preferred: A small percentage of people qualify for the super-preferred category. They have excellent mental and physical health, no family history of disease or chronic illness and maintain a healthy weight.
Preferred: Individuals who qualify for the preferred category typically have no history of disease or illness in the family and have good overall mental and physical health, although they may have minor risk factors, such as being slightly overweight.
Standard plus: Someone who qualifies for the standard plus category likely has good overall physical and mental health but may be riskier to insure than individuals in the preferred category because of their profession, hobbies or family health history.
Standard: Individuals with an average amount of risk due to their health, lifestyle and family history qualify for the standard category.
Substandard: People in the substandard category likely have health issues or a history of illness and complications such as cancer, stroke or diabetes.
Individuals who fall in the super-preferred and preferred categories typically receive the best rates. Common risk factors that prevent you from being categorized in a more favorable class include:
Diabetes
Cancer
Alcohol abuse
Frequent travel to high-risk countries
Weight and overall health
Heart disease
High-risk hobbies and activities including drag racing, skydiving and mountain climbing
Hepatitis C
Rheumatoid arthritis
Stroke
Tobacco use
Any of these factors, especially a combination of them, can lead carriers to assign you to a less favorable risk class, but this doesn’t mean you’re ineligible for life insurance coverage. It may mean your rates are higher, which is why shopping around for life insurance is important because these rates can vary insurance carrier to carrier.
Who should purchase impaired risk life insurance?
Impaired risk life insurance can provide coverage and financial protection for those who may not qualify for traditional life insurance policies. You may consider purchasing impaired risk life insurance if you have pre-existing medical conditions, a history of chronic illness, a high-risk occupation or dangerous hobbies. This type of insurance can also be beneficial for individuals who have been previously declined coverage due to their health or lifestyle factors.
Have questions about impaired risk life insurance? SelectQuote can help.
If you’re interested in impaired risk life insurance, or are simply looking to better understand your risk factors as they relate to life insurance, SelectQuote can help. Our experienced licensed insurance agents offer personalized guidance and support during the life insurance shopping process, taking the time to learn about your needs and quickly finding plan options on your behalf. We search a variety of trusted carriers in just minutes, saving you time so you and your loved ones can get the protection you need.
