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Life Insurance: Providing Security for Your Survivors

What If You're Rated or Uninsurable?

If the company rates your policy, it means they consider you a substandard risk. In turn, you will be charged a higher premium because you statistically have a greater chance of dying than a standard policyholder at your age. While the majority of people who are rated have a certain health condition(s), you can also be rated because of occupations or activities you engage in, or past histories of alcohol or drug abuse. The extra premium you are charged depends on the degree of risk you pose. Sometimes your premium can jump five to ten times the standard premium.

What can you do if you think you may be rated? Here are some suggestions:

  1. It's best to find an insurance agent or broker that works with several companies, as opposed to an agent that represents a single company. Your agent may recommend some companies that have more liberal underwriting for people in your situation to increase your options of being insured.
  2. Submit a trial application. You'll need to complete an application just as you normally would, and the company is authorized to obtain your medical history, but you won't have to go through the medical testing. The company will determine whether you are standard, ratable or uninsurable—assuming subsequent medical tests don't uncover anything other than what the company already knows about you. And, if they decline to make you an offer, you haven't been officially declined coverage, which is a question often asked on a life insurance application.

What Can You Do If the Company Offers You a Rated Premium?

  1. See if you can buy term insurance through an employer. The employer may also have group universal life insurance which you may be able to purchase without evidence of insurability or by answering a few simple health questions.
  2. If you belong to an association, check to see if they offer a group policy. If the life insurance limits are low enough, you may have a shot at buying group term at a decent price, unless they ask you specific medical questions related to your condition or whether you have ever been rated or turned down for life insurance.
  3. Have your agent get multiple quotes for you. Two comparable companies may interpret your medical history differently. An agent working on your behalf may not be able to find a company with top ratings that is willing to make you a standard offer. But he or she may be able to find a company with sound claims-paying ability that may offer you a standard premium, or a premium with a lesser rating. Don't necessarily settle for the first offer you receive. On the other hand, don't procrastinate either... this is insurance on your life.
  4. If your health condition is not permanent, and you are symptom-free for several years, the company may reduce and even eliminate your rating. Medical conditions like cancer, heart attacks and strokes become less of a risk the longer you are symptom-free. You may have difficulty getting a company to make you an offer if you are recently discharged from an alcoholism treatment center. But if you're without incident, alcohol-free, and in good health after five years, there's a very good chance you'll get a standard policy.

  5. Have your company evaluate your condition annually, and shop around as well. You may find very strong insurers now willing to make you a better offer.

  6. If you were considering term insurance and are planning to keep the policy more than 15 years, consider a universal life policy. Although the initial premium for the UL policy may be slightly higher, it can be designed to mimic a level term policy. The UL policy can take some of the sting out of the long-term rating.

But what if you're totally uninsurable? You have two choices:

  1. Buy through an employer, up to specified amounts, during special enrollment periods.
  2. See if you can purchase a guaranteed issue policy. These polices pay very small death benefits and do not pay the full death benefit until the third year. Besides being very expensive, if you die in the first year, your beneficiary may only receive 1/3 of the total death benefit.

There are other guaranteed issue policies which offer higher death benefits but subject you to a brief medical questionnaire. Look for an agent that is experienced in this area.

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