Key Takeaway
Most life insurance companies require applicants to undergo an underwriting process. During this insurance process, applicants undergo a risk-assessment, which can determine their eligibility for coverage and their monthly insurance premium rates. Individuals with increased medical and lifestyle risk often face higher premiums or have difficulty gaining eligibility for insurance coverage. There are ways high risk individuals can improve their insurance rates and eligibility by making improvements to their lifestyle choices.
What Makes You a High-Risk Life Insurance Applicant?
High-risk life insurance applicants are applicants who have health issues and/or lifestyle habits that make them higher risk for insurance companies to insure. High-risk applicants often have to pay higher insurance rates. Insurance companies may also consider other factors, such as age and gender, but medical risk and lifestyle typically weigh the heaviest when determining your risk class for life insurance. In this guide, we'll discuss what makes insurance applicants high risk.
Medical Risk
Medical risk is one of the top factors an insurer will evaluate to determine your eligibility for insurance coverage and policy premium rates. Insurance companies evaluate your medical risk by asking you to fill out an evaluation or medical history form, a list of your current prescriptions, and sometimes a medical exam. In some cases, the insurer may also request copies of your medical records from healthcare providers. This information will be given to your insurance company during the underwriting process.
For most insurance companies, the following pre-existing (conditions present prior to insurance coverage) conditions are considered high-risk:
- Cancer
- Heart attack and/or heart disease
- Stroke
- HIV and/or AIDS
- Kidney disease
- Chronic obstructive pulmonary disease (COPD)
- Poorly managed conditions, including diabetes, high cholesterol, and more
Even if you currently don't have any of the above medical conditions, your insurance company may still factor any history of them into your risk assessment and rate calculation.
Lifestyle
Lifestyle is another major factor of consideration when calculating your risk for insurance. This category encompasses your hobbies, business occupation, and more, so don’t be surprised when seemingly ‘random’ questions pop up on your questionnaire–they aren’t random. These questions determine your risk for insurance and software will calculate whether you are a high-risk applicant.
Factors like occupation can play a role in your risk of death, as some jobs have a much higher risk than others. Your risk for serious injury or death varies considerably when you compare a construction worker to an accountant. High-risk occupations include people who work in logging, farming, fishing, and forestry occupations have the highest accidental death fatality rate of all occupational groups, and therefore may experience higher insurance premium rates.
If you love skydiving, mountaineering, or motorcycling, you may also be a high-risk insurance applicant. In general, insurance companies want to know if you engage in high-risk or dangerous hobbies like the ones listed above when applying for your policy.
Heavy alcohol drinkers and nicotine users tend to fall into the increased risk category for life insurance. This is because smoking and other nicotine use has been linked to several health risks and medical issues, including some types of cancers and COPD.
If you’re a man who drinks more than two drinks per day or a woman who drinks more than one drink per day, your insurance company may qualify you as high-risk. This is because high rates of alcohol consumption can trigger other serious health complications, like liver and kidney damage.
Your insurance company may also ask for your auto insurance information and driving habits. Reckless drivers–those with a lot of speeding tickets or driving violations–can often find themselves in the high-risk insurance category for both life insurance and car insurance.
How Life Insurance Rates Work
Insurance companies typically use a complicated rating system for each type of life insurance, using a range of factors to calculate a rating for the applicant. This rating determines how much you’ll pay in monthly insurance premiums. The lower your rating, the higher-risk a policyholder you’re considered when applying for life insurance.
Higher-risk individuals typically pay more in insurance premiums because, in theory, they may have less time to pay the insurer for their death benefit coverage depending on their condition. Individuals with higher ratings are in better health, and in theory, have more time to pay the insurance company for the eventual death benefit associated with their policy.
Understanding Rate Classifications
Generally speaking, most insurance companies use the following risk classes to determine an applicant’s eligibility for a policy and the insurance premiums to charge:
- Super Preferred Risk Class: This class is for people in perfect health who don’t engage in risky hobbies or dangerous occupations. They usually pay the lowest insurance premiums of life coverage.
- Preferred Risk Class: This class is for individuals with good health, but may take medication to treat a condition, may be slightly overweight, or have a family history of higher risk health conditions.
- Standard Risk Class: This group may have a higher body mass index, take multiple medications, or engage in some risky lifestyle choices or occupations. Most people generally fall into this life insurance category.
- Substandard Risk Class: This is the highest-risk group, typically facing the highest monthly insurance premiums. This group is for individuals with significant or multiple serious health conditions, who may engage in excessively risky hobbies or lifestyles, have a dangerous occupation, or are heavy tobacco and/or alcohol users.
Are There Ways to Save Money on High-Risk Life Insurance?
There may be ways to lower the amount you’re quoted for a life insurance policy, but these can take time, planning, and dedication. You must always disclose all information in-full and accurately‒if you fail to do this, it may qualify as insurance fraud, which can be a crime depending on the circumstances.
Because your risk factor is mainly determined by your health and habits, these are the areas of your life you need to improve and provide evidence for if you hope to get lower insurance rates. Some examples include losing weight and quitting smoking. In cases of quitting smoking or tobacco use, it may be more helpful to have quit a minimum of one year prior to applying for an insurance policy.
Another way to possibly save money is to shop around with various insurance partners. Get quotes from multiple insurance companies and compare them, or work with an insurance agent who can help you navigate this process to secure the best rate for your life coverage needs.
