Applying for life insurance? Get the best health rating possible

Life insurance premiums can add up over the years. Of course, you want those premiums to be as low as possible, but you’re at the mercy of the life insurance company. What few know is the health ratings that insurance companies assign to you to determine your premium can vary from company to company. For example, one company may be more lenient for those with diabetes, while another may be better for those who’ve had certain types of cancer. How do you choose the life insurance company that will view your health situation most favorably? Consider the following approach.

What few know is the health ratings that insurance companies assign to you to determine your premium can vary from company to company.

Understanding the formal life insurance application process

When applying for life insurance, insurance companies require you to complete, sign, and submit a formal application. The application asks for the insured’s personal identifying information such as date of birth, Social Security number, and other related data. The application also asks medical and lifestyle questions that enable the insurance company to assess the individual through a process referred to as underwriting. Ultimately, the insurance company will determine a health rating for your life insurance policy.

Completing and submitting a formal application can be optimal if the insured is in good health, under age 60, and applying for less than $5,000,000 of death benefit.

Understanding the informal life insurance application process

But what if the insured doesn’t fit that profile? What if the individual isn’t in good health, is over age 60, or is applying for more than $5,000,000 of death benefit? In this situation, starting with an “informal application” can be advantageous.

Informal underwriting can be especially helpful when the insured has health impairments, participates in higher risk avocational activities such as piloting an airplane or scuba diving, or there’s simply a lot of uncertainty about how someone might be assessed from an underwriting perspective.

An informal application, sometimes known as a trial application, is not company-specific. It’s a general application that also asks personal identifying information, in addition to medical and lifestyle questions. A trial application for life insurance is just as comprehensive as a formal application, including inquiries about hazardous avocations, foreign travel, and driving history.

The benefits of a trial application

The trial application also includes an authorization that permits the insurance agency to send the insured’s information to several insurance companies simultaneously. This gives the companies the opportunity to review the case and offer preliminary, or tentative, health ratings. From there, the insurance agent can negotiate among those companies to improve the rating and minimize the final life insurance premium.

Once the tentative health ratings are known and negotiations are complete, the insured can formally apply to the company or companies with the best offer to purchase the desired life insurance policy.     

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