What are Life Insurance Classifications?

Purchasing a life insurance policy isn’t quite like buying a product off the shelf. With the help of your insurance agent, the policy you buy is highly customized to you. The type of policy, amount of death benefit, and even the cost of your premiums are largely up to you. It depends on what you’re looking for, what you need, and what you can qualify for.

The truth of the matter is, even if someone else buys the same exact policy as you (as far as type of policy and amount of death benefit go) it is highly unlikely that you would both be paying the same price for the policy. How is that? Well, that’s where life insurance “classifications” come in.


What Determines a Life Insurance Classification?

Insurers provide an extremely valuable service, but they’re not exactly a charity. Over time, they’ve determined a matter-of-fact way to estimate the cost or risk associated with insuring someone. The way they see it (and what decades of data tells them) is that a younger, healthier person is safer and more profitable to insure than an older person with poorer health. To compensate for this “lower profitability,” insurers will still provide coverage to people in poor health or advanced age–they will just charge them more.

We’ve alluded to two of the biggest factors that affect one’s life insurance classification: age and health. When you apply for a life insurance policy, you typically have to go through a medical exam and answer lots of questions regarding your medical history. Things like your current health, your weight, your family’s medical history, and previous or current usage of tobacco, drugs, or alcohol all can affect your classification–and therefore your premiums.

Even things like a criminal record and your lifestyle can affect the perceived risk insurers perceive in providing you coverage. After all, a base jumping rodeo clown is probably at greater risk than the star of the local bowling league.


What are the Health Classifications?

There are generally four different broad categories or classifications insurers group people into. The actual names of these classifications may be different between insurers, but generally sound something like the following:

  • Standard
  • Standard Plus
  • Preferred
  • Preferred Plus

In order from most expensive to least expensive, a “Standard” rating might be given for someone with a more complicated medical history, who may not have an ideal weight/height ratio, and so on. This rating can improve up to “Preferred Plus,” which would be given to someone in great health and condition.

People who smoke will likely be given an additional classification, usually something like “Standard Smoker” or “Preferred Smoker.” Because of the increased health risks smoking causes, they would pay more for their premiums.

Someone in the lowest classification (in some cases, a “substandard” rating is used) may pay up to 9 times as much as someone in the “Preferred Plus” classification.

Quitting smoking, working on your health, and applying sooner rather than later can all help decrease your premiums and improve your classification when you plan to purchase life insurance.


How Aspen Life Settlements Can Help

Even with a great classification, you may find that your premiums are a little more than you can handle. Aspen Life Settlements can help!

We are interested in most whole life and some IUL policies, and will actually pay you cash for your policy. We use the “cash value” feature of your policy as a safe place to grow our money, and let you keep your coverage and death benefit without making you pay another penny into the policy.

If the sound of not having to pay for your life insurance policy anymore–and still getting to keep the death benefit–sounds appealing to you, reach out to Aspen Life Settlements today to see how much your policy may be worth!

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