15 June 2012 0 Comments

Why Is Applying For Life Insurance So Difficult? It’s Much Easier Buying Car Or Home Insurance!

If you’ve read all my blogs, you should now have the information you need to be an informed buyer. But, as you proceed to purchase a policy you might wonder why it is such a more difficult process than buying car or home insurance.

The complexities of the human body are far greater than the factors involved in rating automobile coverage or homeowner’s policies. Additionally, auto and home plans can be cancelled – or have their premiums increased – after six to twelve months. With Life Insurance the company is guaranteeing both your coverage and your premium for 10, 20, or 30 years, or even for the rest of your life. It is a unilateral contract in which you have all the control. That’s why Life Insurance companies must be more thorough when it comes to analyzing risks.

Additionally, as more consumers go website shopping, insurance companies strive for the lowest premiums for their very best risks in order to attract attention. This requires gathering much more detailed information. When I started selling Life Insurance in the 60’s, a “standard” underwriting class was the lowest premium issued. There wasn’t even a difference for tobacco users. Obviously, the chain smoker with the questionable medical history was getting a great deal while the non-smoker in pristine health was vastly overpaying. That was corrected by introducing lower premiums for non-tobacco users.

If a non-tobacco user deserved a lower premium that would also be true for individuals who followed a healthy life style and had good family history. So, a few years later, additional lower premium categories were offered that yielded substantially lower premiums for select applicants. Today, an insurance company might have underwriting classifications of Preferred-Plus, Preferred, Standard-Plus, and Standard for non-tobacco users, plus tobacco user rates of Preferred and Standard. In addition to these six premium classes, companies add extra premiums for specific underwriting conditions. It is the agent’s job to take all of these criteria into consideration when choosing insurers– i.e., which companies are best for an applicant with a history of heart attack, cancer, stroke, diabetes, obesity, etc.?

Don’t look at an insurance company’s lowest premium listed on some website and assume that’s what you will be charged. You’ve got a way to go before you know what your premium will be.

Next I’ll cover what needs to be done to determine what your premium will be.

Leave a Reply