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Chances are you’ve also been met with extremely high premiums or declined coverage.
It can be frustrating and discouraging. But the good news is that with a few extra steps, you can prevent the bigger risk of leaving your family unprotected. There are plenty of insurance options for those who have been declined or who are looking to pay lower, more affordable, premiums.
A person is defined as “high risk” if they have any health impairments or their lifestyle choices are determined to lower their life expectancy.
Often, if a client is deemed high risk, they are saddled with high premiums or worse, declined coverage for a standard life insurance policy. High risk life insurance policies (also known as impaired risk policies) are geared toward people with high risk hobbies, professions, diseases, or habits.
Companies take into consideration many factors when assessing high risk life insurance quotes. First, premiums, determining a client’s life insurance quote, are set by four risk classes:
Preferred: a candidate whose life expectancy is longer than the average person’s. Premiums will be lower than Standard
Standard: a candidate whose life expectancy is the same as the average person’s. All other premiums are determined in relation to this risk class.
Substandard: a candidate whose life expectancy is considered lower than that of an average person. Premiums will be higher than a Standard class member.
Declined: if the client poses too great a risk to the insurance company, they will be declined coverage.
These risk classes are determined by underwriters. It’s their job to accept the greatest amount of business while still allowing the insurance company to remain profitable. Each risk category determines the premiums the client will pay to the insurance company. A company’s cost of insuring a lower risk is less than the cost of insuring a high risk, which means that the better risk class a client falls into, the lower their premiums will be.
Here are a few other factors high risk insurance companies consider when classifying potential candidates:
Professions: High risk professions, such as offshore oil workers and helicopter pilots pose a higher risk than the average office job. They typically come with “flat extras” which is an extra charge on top of the normal premiums.
Diseases: Many diseases are considered risk factors to life insurance companies, as they shorten the lifespan of a potential client and can cost the company money. These diseases include diabetes, obesity, multiple sclerosis, cancer, or melanoma.
They can also include high blood pressure or high cholesterol. Insurance companies will look at the date the disease was diagnosed, any medications taken for treatment of the disease, the date of the client’s last treatment, and additional medical conditions the client may have. If the client is in remission, the company will want to know how long they’ve been in remission and the results of their last follow-up exam. High risk insurance carriers will also ask for medical records and copies of treatment plans.
Hobbies: Underwriters will look at the hobby’s level of difficulty, how often the candidate participates in the high risk activity, the type of equipment used, and if the client has any certifications or training in the activity. High risk hobbies vary, but often include skydiving, rock-climbing, scuba diving, and piloting.
Habits: Here is where risk assessment gets a little bit tricky. Any habits that have detrimental effects upon a client’s health, such as smoking, are considered high risk. A lot of people make the mistake of trying to hide the fact that they’re smokers from insurance carriers. Most standard and high risk life insurance policies have a two year contestability, so it is important to be completely honest with your broker about your habits and health history. Length and frequency of a high risk behavior are also important determining factors. Although smoking is a red flag to most companies, if you’ve quit for a year or more you may have lowered your risk factor, and could be eligible to apply for lower rates.
The good news is that being a high risk candidate does not necessarily mean you will be declined for insurance coverage. If you have ever been declined an insurance policy, chances are you were working with the wrong company or a representative with little experience. There are a multitude of companies that specialize in high risk policies. Additionally, many companies assess risk differently, so what may be considered a risk to one company might not be considered a risk to another company. The key is to use this to your advantage.
Declines and the process of contacting these carriers can often be daunting if you don’t know where to begin. The best way to get high risk life insurance coverage is to work with an independent high risk life insurance broker.