If you recently applied for a life insurance policy and were told that your risk factors put you into table rating territory, there is a good chance that you have no idea what that means.
The basic premise behind life insurance is that insurers calculate the odds of a person dying and then price life insurance coverage based on those risks. When it comes to term life insurance, the insurer is basically betting that you will live past the term of the insurance policy.
Insurers group policyholders into categories that reflect their risks, but in some cases, an applicant’s medical issues or lifestyle factors push their risk factor beyond the standard categories. This is where table ratings come in to play.
Life insurance standard classifications
When you apply for a life insurance policy your insurance company will examine the results of your physical exam as well as your family health history and lifestyle to determine if you fit into one of their standard categories or classifications.
Classifications or categories will vary slightly by insurer but in many cases, there is some standardization. Typical categories include preferred select, preferred, standard plus and standard. If you are a smoker you will be in a smoker category such as preferred smoker and standard smoker.
Here is a quick rundown of who is included in each category:
- Preferred Select: This classification usually refers to the very healthy. In order to qualify for this level you need to have a normal weight and height as well as no family factors that could lead to an early death. This category enjoys the lowest premiums and may also be called Preferred Elite or Preferred Plus.
- Standard Plus: These applicants are still in great health but a medical or lifestyle factor prevents them from qualifying for a Preferred Select. Being overweight, having high blood pressure or cholesterol issues could be the culprit.
- Standard: This is for everyone that is average when it comes to heath. They have a normal life expectancy and could have weight issues or a parent that died early.
- Preferred Smoker: If you are a smoker who would normally fall into the preferred select category this is where you will fall. Smokers will always pay more for life insurance so be prepared for a higher premium.
- Standard Smoker: A smoker who would fall into the standard category if they didn't smoke will be placed in this category.
What are table ratings and how do they work?
If a life insurance applicant doesn't fall into one of these standard rating categories due to a health issue, risky occupation or an adventurous lifestyle (think skydivers, rock climbers etc.) he or she may end up with a table rating.
Basically, anything that increases the likelihood of premature death can trigger a table rating.
"Table ratings can be given for medical and non-medical conditions," says Thomas Bigoski, owner of the Bigoski Insurance Agency in Gainesville, Va. "Some examples include high blood pressure, cancer, diabetes and your combined height and weight, especially obesity. Other issues could be a history of mental illness or your occupation."
Life insurance companies typically assign debits and credits based on your medical history and other factors when calculating your premiums. For instance, if you have heart disease or cancer, that would be a debit -the more debits you have, the more costly your premiums. If, however, you receive a credit for healthy blood pressure and cholesterol, these credits would decrease your premium.
Other factors can trigger a table rating as well. "A life insurance applicant with a history of multiple convictions for driving under the influence or someone who pilots small planes could also receive a table rating," says Maureen Leydon, vice president and chief underwriter for MetLife in Boston.
While certainly not a definitive list, here are a few conditions that can trigger a table rating:
- Family history of heart disease or cancer
- Diabetes - both type 1and type 2
- Criminal record
- Previous heart attack or stroke
- Mental health issues
A table rating allows insurers to take additional risk factors into account when setting a policy premium. Instead of a preferred or standard category, table rated applicants are given a number or letter that designates their rating and depending on their table rating, they will pay an additional percentage on top of the standard rate.
While table ratings can vary between insurers, there is some standardization. Table ratings usually range from A to P or 1 to 16 depending on whether the insurance company is using a letter or number system. Each letter or number usually adds 25 percent on top of the standard rate.
How a table rating affects your life insurance premium
If you receive a table rating from an insurance company, you are absolutely going to pay more for a life insurance policy, how much more will depend on your rating.
This is how table ratings affect your premium. If you receive a table rating of "A" you will be paying the standard rate plus 25 percent for a life insurance policy. Each letter or number you go up adds another 25 percent. Once you get up to a "G" rating you are now paying the standard rate plus 175 percent.
"For example, if a standard premium for a term life policy is $100, if you have a table rate of 1 or ‘A,’ you will most likely pay 25 percent above the standard rate, or $125 per month," explains Bigoski. "If you have a table rate of 2 or ‘B’ you will pay 50 percent above the standard rate, or $150 per month."
It should be noted that while most insurers use 25 percent per letter as a standard, it is not a requirement and some insurers will use a different percentage.
What can I do about a table rating?
It's important to remember that risk is not standardized, each insurance company has their own proprietary rating systems so while you may be table rated at one insurance company, its possible you may qualify for a standard rating with other insurers, which makes shopping your policy important.
- Shop your policy: If you have been table rated, shop your policy with other insurance companies to see if you can qualify for either a standard policy or even a higher table rating. The premium difference between an "A" table rating and a "G" table rating is significant.
- Accept and reapply: In most cases you can reapply in the future for a lower rating if your health or other conditions improve. "Most companies will offer you an option to reapply, typically two years after the life insurance policy has been issued, to see if your table rating can be lowered," says Leydon. "For instance, if the issue was that you were overweight and now you have maintained a lower weight for a year, you can reapply."
- Change coverage levels: While this doesn't change the fact that you are table rated, if the premium is too high, change the coverage levels. If you lower the face amount of the policy or change the term length you can drive down the cost of coverage.
- Table Shave: Certain insurance companies offer table shave programs that allow applicants to improve their health rating by up to two table ratings if they meet certain medical or lifestyle characteristics. These programs, and qualifying medical or lifestyle factors are set by each insurance company.
As an example, a company may have 16 health credit factors available to applicants that can range from regular preventative medical care, being a lifetime non-smoker or having an income over $100,000. If an applicant meets four of any of the 16 factors, the insurer will improve their table rating by one table, going from a "C" to a "B" for example.
This can be a major money saver if you can manage to move up two tables.
- Ask for an explanation: You have the right to an explanation as to why you have been table rated. If you can provide evidence that the rating is incorrect or your health warrants a higher rating you may be able to improve your rating. "If you can provide evidence -- such as a negative stress test or treatment for a condition that the insurance company can evaluate it could potentially change the table rating," says Leydon.