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How Life Insurance Companies Decide Your Policy Ratings

These ratings will affect how much coverage you can get at each price point. If you’re healthy, you’ll get a more favorable ratings and therefore have more affordable life insurance rates.

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Who Is The Best Life Insurance Companies

The most significant deciding factor for your premium and coverage is your current health status. Aside from health, many providers give importance to your daily activities and behavioral habits that can endanger your life in the future. Those in good health and living a healthy lifestyle away from dangerous activities will surely acquire a low premium and the best life insurance deals. 

It only means that the riskier you are as an insured, the higher premium you need to pay for coverage. All the best term life insurance companies decide policy ratings to determine the level of the potential risk of an applicant. It is according to actuarial scientists who usually develop the pricing models for most insurance providers. It is good to know that these classifications are easy to understand for a simple layperson.

The following are the most common classifications from insurers to know the level of your risk. However, terms for each category may differ from one insurer to another. One needs to become aware of these classifications to ensure that you only get the best deal for life insurance

Best life insurance companies that pay out

  • Northwestern Mutual
  • MassMutual
  • Prudential
  • Lincoln Financial
  • New York Life
  • State Farm
  • Transamerica
  •  MetLife
  • Pacific Life
  • American International Group (AIG)
  • Nationwide
  • Brighthouse Financial

#1 Policygenius
#2 Ethos
#3 Haven Life
#4 Bestow
#5 Assurity
#6 Foresters
#7 AIG
#8 SBLI
#9 Fidelity Life
#10 Banner Life

The 10 Worst Life Insurance Companies

worst life insurance companiesIn order to help consumers before they have to file a claim, researchers at the American Association for Justice (AAJ) did a thorough investigation to determine the 10 worst insurance companies in America. 

1. Allstate
2. Unum
3. AIG
4. State Farm
5. Conseco
6. WellPoint
7. Farmers
8. UnitedHealth
9. Torchmark
10. Liberty Mutual

Am Best life insurance ratings

AM Best is a trusted organization that rates insurance companies financial stability. Their ratings help consumers determine which life insurance provider is financially strong and can fulfil its commitments to policyholders. Ratings range from A++ (superior) to D (poor), with additional symbols like + or – indicating finer gradations within each category. It’s essential to choose a life insurance company with a robust AM Best rating, as it indicates they are more likely to be able to provide long-term protection for you and your loved ones.

Life insurance company ratings chart

Here is a chart of life insurance company ratings from some of the top rating agencies:
Rating Agency | A.M. Best | Fitch | Moody’s | Standard & Poor’s

Life insurance policy ratings

Life insurance policy ratings are a way for insurance companies to assess the risk of insuring an individual. Generally, life insurance companies use rating systems when evaluating applicants’ health conditions and personal history, among other factors. These ratings will determine how much you’ll pay in premiums each month. While it’s essential to find a highly-rated insurer, remember that policies with higher ratings may come with higher premiums. So, evaluating and comparing different policies based on your needs and budget is essential before making a final decision.

Difference between standard and select preferred life insurance rating

The main difference between standard and select preferred life insurance ratings is the premium you will pay. Select preferred policies are for those in excellent health, have no family history of serious illnesses, and do not engage in high-risk activities such as smoking or extreme sports. These policies come with lower premiums than standard policies because the insured is considered less risky to insure. Standard policies are for individuals with health issues or risk factors that make them a bit riskier to insure, resulting in higher premiums.

What is super preferred life insurance

Super preferred life insurance is a type of policy available to individuals who are in excellent health and have excellent credit. Applicants for super-preferred policies generally undergo more rigorous underwriting than those applying for other types of life insurance policies. As a result of their excellent health and low-risk status, they can secure lower premiums. However, not everyone will qualify for this type of policy, and even if you do, you may still find other types of policies that better fit your needs.

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Who Has The Best Life Insurance Policy When Deciding Policy Ratings 

Classifications are based on the applicant’s health condition and other risk factors. Most of these insurers will ask for a medical examination to know your health condition. In the case of no medical exam life plan, insurers will dig deeper into your medical records, pharmacy records, and other vital documents to determine your risk level. The following are standard classifications where you might fall under once you apply for a plan. 

  1. Preferred Plus: Some other terms are preferred select, preferred elite, or super preferred. 

Although it may sound good, this classification is highly selective, and only 5 percent of the total population is qualified to apply. This category is applicable for applicants with almost spotless health history in their lifetime. However, you may qualify if you have an average Body Mass Index, cholesterol level, blood pressure if you are not smoking, and no serious health risk in terms of family history. Insurers give importance to the family medical history of parents or siblings diagnosed or died because of cancer or any heart-related condition before 60. 

Take note that insurers give high regard to clean driving records. Denial of application can happen if you have two or more driving violations or accidents in the past three years and suspended license history or a DUI conviction in the last few years. 

  1. Preferred: It is for applicants with good but not spotless health conditions.

It is the right choice if you have excellent physical health conditions. You must be receiving treatment and medications end. It is applicable for people with slightly higher than normal cholesterol, blood pressure, and BMI. 

Those with exceptional health conditions, but riskier daily activities or jobs like driving, logging, climbing, sky diving, roofing, and more will fall under this category. 

  1. Standard Plus: It is for applicants with average health conditions.

Applicants who usually qualify under this category are in excellent health status but with a family history of the disease and other minor health conditions that are manageable. If you are slightly overweight, but with no underlying health problems, you may qualify in Standard plus. 

  1. Standard: It is the most common classification that many applicants acquire for their life insurance. 

Suppose you have an average health status, taking at least one or more medications, and have a family history of diseases like cancer, high blood pressure, and other heart problems. In that case, you may qualify under this category. 

  1. Preferred Smoker: For those who smoke occasionally. 

It is a category especially for people who occasionally smoke but not a chain smoker. This classification is also for people who just recently quit smoking, but you might need to show medical records that you are in good health condition as a medical exam.

  1. Standard Smoker: For those who are chain smokers.

This classification is for applicants who regularly smoke several cigarettes per day. The underwriter will usually ask how many sticks can you consume a day. 

Prudential Life Insurance 

prudential life insuranceThere are cases when an applicant is not qualified for any of the above categories, but it does not mean they will not get the life insurance coverage they need. As you can see, even the lowest class requires an individual to have an average health condition. Applicants with chronic diseases like diabetes, depression and anxiety,  obesity, high blood pressure, and cancer are not included within these set parameters. 

Any applicants who fall short of the above parameters are given an option known as “table ratings.” Ratings represent numerical or alphabetical figures in descending order of risks such as A, B, C, or 1,2,3. The company’s rates in this classification are similar to the standard but with an additional 25 percent of the total standard rate. For each step down the ladder, the percentage also increases. 

State Farm life insurance

state farm life insuranceState Farm was founded in 1922 as an auto insurance company and today operates as a mutual company with 85 million policies and accounts in effect. Products include life insurance, home and renters insurance, auto and specialty vehicle insurance, and insurance for health, liability, and disability. In addition, State Farm has partnered with Trupanion to offer pet insurance.

The company also offers home and vehicle loans, checking and savings accounts, credit cards, and a wide variety of investments and other financial services. It is based in Bloomington, Illinois.

Pros

  • Received an A++ rating from AM Best

  • Among the most affordable life insurance companies in our rating

  • Offers term, universal, and whole life insurance

Cons

  • Not available in Massachusetts or Rhode Island

  • Policies must be purchased through a State Farm agent

Effects of Health Conditions on Life Insurance
Risk Classification and Why They Help Determine How Life Insurance Companies Decide Policy Ratings

According to the applicant’s health condition, it is still possible to get a high rating after the actual evaluation process. The following are the costliest health conditions that might affect your rating.

High Blood Pressure

People with high blood pressure can still qualify for the preferred category if their condition is manageable, and you are receiving the right treatment.

Diabetes Type 2

This type of diabetes can lead to diverse detrimental health issues such as renal failure and heart diseases, but proper management and care can aid in later good health conditions. In this case, the right diagnosis can give you higher ratings.

Sleep Apnea

Insurance providers are wary when it comes to this health condition because of the risks involved. A person with such health issues is prone to accidents as well as heart diseases. However, well-managed cases and the right treatment can give you better premiums and coverage. 

Heart Diseases

Heart conditions may lead to a heart attack that is very unpredictable and deadly. If you have a family history of heart diseases, you need to present a positive diagnosis from your doctor and a care management plan to get favorable consideration for ratings.

Asthma

Asthma is sometimes fatal for some, but a well-managed asthma case can still acquire a premium rate. If you do not receive any proper care and treatment, it is a red flag for many insurers. 

Weight Conditions

Weight-related health conditions such as obesity, anorexia, and bulimia are risky for many insurers. If you can reach your ideal BMI and anorexia is inactive for a long time, you may acquire a good rating. By getting a medical record to prove your health status, you can convince your good health standing underwriter. 

Organ Transplant

Applicants who undergo an organ transplant are riskier for many insurers because of the life-threatening complications involve. The underwriter is more lenient for kidney and corneal transplants than liver and heart transplants. 

Depression 

People suffering from depression, although most of them are healthy with no underlying chronic condition, are considered risky. The main reason is the suicidal tendency of a person suffering from depression and anxiety. The category may vary according to symptoms and treatments from preferred to denial of the application.

High Cholesterol

It is a common health issue but often views the same as having high blood pressure. The rating depends on the quality of care and treatment, and the severity of the condition.

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Possible Solutions to Improve Health Rating

Once you get an insurance classification and approval, an insurer will not move your category down if you gain weight, start smoking, or develop cancer. Moving up is also hard to do, but it is not impossible. There are different factors that an insurer can weigh down to consider moving up your rating. You can ask for a policy check every two years. Some factors can change over time, making you qualify for a higher rating such as cholesterol level, smoking, driving records, substance abuse, blood pressure, and risky careers and or hobbies. These factors can change over time for the better and may increase your rating for a more affordable premium. Shop Around.

Frequently Asked Questions

How do insurance companies determine ratings?

Insurance companies determine ratings by analyzing various factors such as the driver's age and gender, the make and model of the car, driving record, location and previous claims history. All this information is fed into an algorithm that generates a risk score determining how much you'll pay for insurance. Factors such as the level of coverage you require can also influence your rating.

How do I get a preferred life insurance rating?

To get a preferred life insurance rating, you should focus on maintaining a healthy lifestyle by exercising regularly, eating a balanced diet, and avoiding risky behaviours like smoking. Additionally, you should disclose any pre-existing medical conditions or health issues upfront to your insurance company and work with an experienced agent who can help you find the best policy for your needs. It's also important to shop around and compare quotes from multiple insurers to ensure you get the best possible rate.

What is the rating scale for life insurance companies?

The rating scale for life insurance companies is typically based on the insurer's financial strength and stability, as determined by independent rating agencies. The most well-known of these agencies are A.M. Best, Standard & Poor's, Moody's Investors Service, and Fitch Ratings. These rating agencies use various methods to evaluate insurers, including examining their financial statements and creditworthiness and assigning ratings indicating the degree of risk associated with each insurer. Ratings typically range from AAA or A++ (the highest rating) to D or E (the lowest). Customers can use these ratings as a guideline when selecting a life insurance provider to ensure they choose a company with a financially stable track record.

Meet the team

About Coach B.

After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.

In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.


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