So you finally convinced yourself to go ahead and buy a life insurance policy. You do what a lot of other people are doing and search “life insurance rates” on the Google search engine. After taking a few days to read some blogs and websites, you see that most of the websites have a quote engine and you decide to enter your information. You jump from one website to another hoping to find a better rate, because who wants to pay more than they have to pay?
You receive 10 calls a day from agents, brokers and call centers. They all have different prices and different companies they represent, and you may ask yourself, “what is going on here? Why am I getting conflicting life insurance rates? I better call directly to the insurance company and get a better price.”
The Reasons You are Getting Conflicting Life Insurance Rates Are:
Life insurance rates are determined by so many factors, such as family history, driving record, current health, health history, and medication, to name but a few. Many brokers only ask you for your date of birth and the face amount of the policy you are looking for, hence they come back with a preferred rating (which is the lowest monthly cost for you), and ask you to agree to the sale of the policy.
The Online Quote Engine isn’t a Great Tool For You
Truth be told, if you aren’t in perfect health, the online quote engine isn’t a great tool for you. Even the most experienced insurance brokers consult with an underwriter before they get back to you with the premium rate estimate because it varies from person to person based on your health. Still, you should always keep in mind that the final rate is determined by the insurance company after a review of your application and not the insurance broker.
Different Companies Specialize in Different Risks
For example, if you are taking medication for cholesterol, you want to make sure that you apply for a policy with a high cholesterol-friendly company. Every carrier has their unique underwriting process based on the company’s risk tolerance, so you will pay a lower premium if you apply with the right company.
You talk to an agent who represents only one insurance company, so you have nothing with which to compare the rate. Making sure your insurance broker works with many different insurance companies means he or she has your best interest at heart, instead of their own loyalty to the company. A broker can shop around, given your specific health situation and policy needs, and find you the best rate and policy.
The Broker Has No Control Over the Quote
This was mentioned before but is worth repeating again. The life insurance broker job description is very simple but often very hard to execute. A broker must know all insurance companies out there, be familiar with each one’s underwriting process (which often changes on a yearly basis), and place the potential client with the best company based on his or her situation.
If the broker isn’t familiar with all the companies out there, you would be placed with a random company, and you may pay more, or get a policy that does not suit your needs. This is a crucial reason for you to always “shop” for a broker and not a rate. You get the right broker and the lowest rate will follow.
Commission Rates are Different from One Insurance Carrier to Another
The insurer is paying the broker, not the consumer. Some brokers prefer to show only the companies that pay them the most amount of money. I can’t stress this enough that choosing a broker may be the most important thing for you to do. Read some reviews, talk with the broker, and ask if he or she is licensed in your state. Don’t buy life insurance blindly.
You Compare the Wrong Products
I can write an entire article on this subject alone. There is always an uncle, a neighbor, or the barista at Starbucks who told you that he got a better rate than what you found, and you should buy their policy. One major problem: they may have bought something completely different.
You are looking at a 30-year term life insurance policy that protects you against any form of death, while they bought an accident plan that pays benefits….can you guess? You got it – only if they die from an accident-related death. If they die from cancer or another sickness, the policy will not pay any benefits. Do your homework to make sure you understand what you are buying, and chose your broker wisely.
What Factors Affect Your Life Insurance Quote
By now, you may be asking, “so what really affects my rates and how can I get the best rates?” There are few things you can do something about, but some are unfortunately out of your control. Let’s look at few of the many things the insurance company’s underwriter is interested to know about you.
This is the most obvious one. The younger you are, the less you will pay. The insurance company would rather increase their chances by getting the young ones because statistically, they live longer. I can’t tell you how many times I get a phone call from someone in their eighties who wishes to buy a policy so he/she can leave something for their loved ones.
The problem is that they are older, and often have many health conditions that -even if they can still get approved- will cause them to pay an arm and a leg. It is always advised to buy a policy when you are young. Not only will you pay a lot less, but you will also get the best table rating possible, which is a super preferred.
Men will hate this! Women pay less because statistically, they live 5-10 years longer than men. They would pay lower rates for a longer term when compared with rates for men in the same category.
Most insurance carriers require you to undergo a medical exam in which they record a few key measurements, such as height and weight, blood pressure, and cholesterol levels, to name a few. They also check for signs of potential future health conditions from the blood test, such as pre-diabetes, or illicit drug use that may lead to a premature death.
There are a few companies that offer no exam policies. However, if you are completely healthy and are not in a rush to obtain a policy, you are wasting your money on these because the premiums will cost more and you will not be able to buy as much coverage.
It’s old news and you have heard it enough, so I’ll keep this short. Smokers pay 2-3 times as much as non-smokers. Smoking with other health ailments, such as high cholesterol, high blood pressure, or being overweight, would lead to a rejected application.
Your genes are something that you can do very little about. Insurance companies take into account the most serious conditions, such as cancer, stroke, cardiovascular disease, etc. They are mostly interested in any condition that your parents or siblings have been diagnosed with, and if they died before the age of 60 years old. They are trying to play “GOD” and read the future to prevent future risk based on your family-related history.
The riskier you are to the insurance carrier, the higher the premium you will pay! There is really no way around it. It’s common sense but often a forgotten fact by many individuals. For instance, if you are trying to get a loan to buy a house, and you haven’t been paying your bills lately, you would pay higher interest on the loan, or be rejected altogether.
The same goes for life insurance. If you like racing cars on the weekend and skydive every other day, you are considered a higher risk individual and will pay more for life insurance. Note that even your profession can be considered a risk to the insurance carrier. High-risk occupations can include firefighters, underground miners, and fishermen.
This shouldn’t be a surprise to most of you. If you have ever bought life insurance in the past, you may recall answering some of the following questions about the past 24 months of your driving history:
- Has your driver’s license been revoked or suspended?
- Have you been convicted of 2 or more moving violations?
- Have you been convicted of a violation of driving while intoxicated or under the influence, or for driving while ability impaired because of the use of alcohol and/or drugs?
Bad drivers are a higher risk to the insurance carriers, and so will pay a higher premium for that risk. If you had a moving violation once last year, you shouldn’t worry about that too much. However, if you had six violations last month, you may be declined for life insurance with most insurance companies.
The insurance company will look up your DMV records to find out your driving records, so don’t try to hide that information, they will find out. When you are up front with your broker, he or she can help you find the company that will see you in the best light.
The insurance carrier will ask on the application if you have a criminal past. A criminal record is a major risk to the carrier and will affect your rates even if you are in outstanding health. This means, you could be very healthy, young, a non-smoker, with no family history of illness, but have criminal activity, and they would decline your application.
Insurance carriers are very worried that past criminals may go back to jail, and incarnation brings all kinds of death risks that the carrier isn’t interested in taking. The severity of the conviction also matters to the carrier.
It’s important that you discuss this type of thing with your broker. Not only might this change which companies your broker will look at, but he or she can also help you prepare a cover letter of explanation for the underwriter that will give you a better chance of your application being accepted, and without a huge cost added to your premium.
A glass of wine on your wedding day or a few times a week wouldn’t be a problem to the insurance company. However, if you are a heavy drinker, you will pay a higher rate. Since there is a medical exam for most policies, you won’t be able to keep your heavy alcohol consumption a secret. The blood test will check for liver enzyme levels, and draw a conclusion based on the results of your blood work.
This is very simple. A 10-year term costs less than a 30-year term. A $1 million policy costs more than a $100,000 policy. Sometimes consumers don’t really know how much coverage they need and are guided by a crooked broker that sells for profit only. Before you buy, you really want to find out if you need life insurance and how much coverage you really need.
Tips Before Buying A Policy
- Evaluate The Various Types of Insurance Plans. There are two primary types of life insurance: term insurance and permanent insurance. Term life insurance offers coverage for a particular period such as 10,20 or 30 years. It’s typically referred to as “pure life insurance” because it’s intended merely to protect your dependents should you die prematurely. Permanent insurance delivers lifetime coverage, along with the opportunity to build up cash value on a tax-deferred basis. Contrary to term life insurance, a permanent insurance policy will stay in place provided you still pay your premiums.
- Consult with an Independent Broker. Brokers will have access to a lot more products and insurer choices than just an agent provides. Brokers also know what carrier has the best chance to approve your policy if you are a high-risk person.
- Various Life Insurance Companies Specialize in Diverse Health Risks. For instance, some carriers offer more affordable rates for smokers or for individuals who take prescription medication to control diabetes, high cholesterol or high blood pressure.
- Prices are fixed by law, which means no broker can offer you the same product for a different price. The final rate will be determined by your insurance carrier you’ve selected. And this is done only after all relevant health history plus the results of your medical exam have been reviewed.
- Review your Life Insurance Policy Every 3-5 Years. How will inflation impact your future needs? Do you need more insurance when your family size increases? Has your health improved since you obtained the first coverage?
- Your broker should email you unbiased plan’s selection. If not, you should find another broker. See below an image of how a proposal should look like.
The Bottom Line
There are a few thing you can do about lowering your life insurance rate, such as controlling your weight, drinking less, or quitting smoking. Other things, such as your gene or health and family history, are out of your control. By now, you should really understand why life insurance rates are a much more complicated process than just typing your name and birthday into an online quoter, or getting a quote on the phone.
The quote is based on so many factors that are changing on a consistent basis by many different insurance carriers. For example,if you are 5’10” and weigh 180 lbs, you could get a preferred rating with one company, and a standard rating with another. How would you know that? Would you call each and every carrier in the country, submit seven different applications, and see who gets you the best rate? No.
Instead, it’s probably a wise decision to talk to an insurance broker who understands underwriting and knows where to place you, so you can get the lowest rate possible. The broker is an expert that is on your side to guide you through the process, and to make sure your needs are met for the lowest price possible.