Why Is My Premium So High?: What You Need to Know About Life Insurance Underwriting

No one wants their friends and family to inherit financial difficulty. Life insurance can go a long way in alleviating financial stress, from paying for a funeral to replacing a lifetime of income.

You want to leave your family financially secure at an affordable price. Premiums and coverage are what you'll look at as you compare policy options from trusted life insurers.

First, we'll take a quick look at life insurance rate classes, then move on to cover some of the biggest things that can affect your premium rate, and finish with additional advice from experts.

Rate classes

Life insurers have 14 to 16 classification levels that determine premium rates. The rate classes with the lowest risk include the following:

• Preferred Plus or Preferred Best
• Preferred
• Standard Plus or Standard Select
• Standard

If you have a higher than standard risk, the rate classes extend into tiered tables that are either numbered or lettered in order. Table 1 is the least amount of additional risk.

“Some companies go down to a table 12, while most will decline after table 10.

The closer you are to Preferred Best, the lower the premium you will pay. Every table rating increases your premium by 25 percent. For example, a table 1 will be standard + 25 percent, table 2 will be standard + 50 percent, etc.” says Chris Abrams, Abrams Insurance Solutions owner.

Your premium rate is determined based on what classification you reach based on underwriting.

Through the underwriting process, the insurance company will review your application, health, lifestyle, and a few other factors to determine the risk of insuring you. Once the underwriting is complete, you’ll know whether your application has been approved or declined. If you’ve been approved, you’ll also get the final premium rate.

If you think you may have higher than standard risk, don’t worry. You may be able to find an insurer that handles your situation well.

“Some companies offer 'table shaving' which means they will reduce the amount of tables if you have other favorable underwriting factors,” says Abrams.

Premium rate factors

There are many things that affect your premium rate. Before even getting to the underwriting process, the amount of coverage and policy type affect the rates you’ll see and the level of underwriting you can expect.

“The death benefit amount you choose and the duration of your policy both materially impact your premium level. The greater your death benefit and the longer your policy period, the higher your premium will be,” says Andrew Chen, Hack Your Wealth founder.

Longer policies aren’t just likely to cost more. They’re also likely to have more rigorous underwriting.

“Whole or permanent life insurance policies tend to be more expensive and an insurance carrier is going to want to know about more aspects of a person’s life. Short term policies for a lower amount may not require as much information. It really depends upon the carrier and the type of policy,” says Walt Capell, Workers Compensation Shop founder.

Another factor that can affect what you spend on premiums that isn’t part of underwriting is the payment schedule.

“Most people pay monthly or quarterly premiums for their life insurance. Insurers typically charge a fee for the premium modes. Pay annually and it could reduce your cost by as much as 10 percent,” says Richard Best, Don’tPayFull.com personal finance expert.

Some insurers may offer some flexibility on premium payment schedules. If you are a disciplined budgeter, opting for a bi-annual or annual payment schedule can make a lot of sense.

Underwriting factors

If you’ve done some shopping around, you’ve probably found that you have to provide some information about yourself before you can see a premium quote. 

“Life insurance rates are initially driven by three factors: age, gender, and tobacco usage,” says Doug Mitchell, CLU, Ogletree Financial Services owner.

Once those factors are considered, more health, lifestyle, and criminal record information will be considered. 

“An applicants age, answers to health and lifestyle questions and their financial well-being are the biggest influencers in the underwriting process and will determine what the premium will be,” says Manny Lirio, Vantis Life Insurance Company, AVP of direct to consumer marketing.

Here’s what experts had to say about

• age
• gender
• tobacco and other drugs
• driving and criminal record
• health
• lifestyle

For more information on how life insurers find information on you, read Cameron Huddleston's Forbes article "How Life Insurance Companies Get Intel On You."

Age

Katia Iervasi, Finder.com insurance writer
“Younger people almost always pay less for life insurance. The reason isn’t subtle: As you age, your life expectancy goes down, and the likelihood of your insurance company having to pay out your policy goes up.”

John Holloway, NoExam.com founder and licensed agent
“In 2019, NoExam.com conducted a life insurance pricing study. The study recorded the results of over 100,000 life insurance quotes, and it shows that the price of life insurance increases with age. On average, the price of life insurance is 65 percent more expensive at age 40 than it is at age 30, and it is 96 percent more expensive at age 50 than it is at age 40. The good news is that you usually require a shorter term policy at age 50 than at age 30. The bad news is that you will have a bigger payment to budget for each month.”

Life Insurance Premium Price vs. Insured's Age

Graph showing results of NoExam.com's study results. Image courtesey of NoExam.com.

Back to Underwriting Factors

Gender

Laraine Sookhoo, OneHourBurialInsurance.com life insurance agent
“Life insurance companies underwrite based on gender at birth.”

Andrew Chen, Hack Your Wealth Founder
“Women generally live longer than men, so they'll have lower premiums on average.”

Katia Iervasi
“Men are considered to be riskier drivers, so women tend to score lower rates.”

Back to Underwriting Factors

Tobacco and other drugs

Katia Iervasi
“To enter the top rate tiers, you’ll typically need to show you have no history of alcohol or drug abuse or treatment within the past 10 years.”

Smoking

Andrew Chen
“If you smoke, you'll pay higher premiums because the risk of death within the policy period increases.”

Alex Enabnit, TermLife2Go.com licensed agent and life insurance expert
“One of the biggest considerations for your premiums is whether or not you smoke. Insurance companies are typically pretty hard on smokers (and even vaping gets included in this category). It’s not uncommon for a smoker to pay at least double the amount that a nonsmoker in the same health class would pay.

The good news is, the longer you go without smoking, the more it can lower your premiums. Most insurance companies consider a person who hasn’t smoked in five years a nonsmoker — even if that person smoked for thirty years before then.”

Laraine Sookhoo
“Life insurance companies consider a ‘non-smoker’ as someone who has not had tobacco or nicotine products for at least 12 months. This would include nicotine replacement products like patches and gum. Of the ten insurance companies that I represent, none of them are asking specifically about electronic cigarettes, but some phrase the question to cover nicotine products and others do not. A couple of my insurance companies will give cigar smokers the non-tobacco price because they only ask about cigarettes.”

Marijuana

Emory J. Smith, Principal of EJS Financial Management 
“Marijuana use is a hot button issue in life insurance. Five years ago, almost no carriers would offer coverage for users of marijuana. Today, many carriers will offer excellent, non smoker rates for admitted marijuana users. In states where medical marijuana is legal, carriers typically underwrite based upon the underlying condition. Why does the proposed insured have the medical marijuana card? Underwriters will ask for copies of the card to prove legitimacy and often extend favorable nonsmoker rates to applicants. Some carriers go so far as to distinguish between smoking, vaporizing and using edibles. The frequency and method of marijuana consumption can change an applicant’s offer. By and large, many life insurance carriers still view marijuana in any form as an illegal drug and decline or highly rate coverage accordingly.”

Prescriptions

Emory J. Smith
“Part of most insurance applications is a prescription drug database search on the proposed insured. Many clients don’t realize such a database exists where all prescriptions, dates and prescribing physician’s information is listed. Whether intentional or unintentional, this search can turn up additional medical information not previously disclosed. I had an applicant disclose back pain issues with ‘occasional’ use pain medication only to find six active prescriptions for the same intense pain medication on the database search. Needless to say, this rose to the level of abuse, and he was justly declined for coverage.”

Back to Underwriting Factors

Driving and criminal record

Katia Iervas
“Safe drivers are viewed more favorably by insurers. To score a cheaper rate, your driving record must be free of moving violations, DUIs and reckless driving in the past three to five years.” 

Richard Best, Don'tPayFull.com personal finance expert
“Life insurers take a look at your driving record. Too many tickets or at-fault accidents may get you a higher premium rating.”

Jared Weitz, United Capital Source CEO and Founder
“If you have a criminal record, especially that of driving under the influence, your insurance policy will be more difficult to qualify for. The level of detail the process covers can be invasive, but is vital to getting adequate life insurance that matches your lifestyle.”

Laraine Sookhoo
“Lifestyle choices can affect pricing in that they force the buyer into a higher rate classification. Those with substance abuse issues, convicted felons, and those with a DUI in recent years may be denied or else approved at a higher rate.

Since insurance fraud is always a concern and because life insurance policies are sometimes used to try to launder money, an insurance company might also deny an applicant if their reports indicate possible character issues that raise flags about these potential problems. They wouldn't affect price, though, just approval.”

Back to Underwriting Factors

Health

Richard Best
“The biggest factor in determining how much premium you pay for life insurance is your health condition and history. This factor includes your family's health history. Insurance actuaries determine which health conditions present the biggest risks and apply premium ratings accordingly. Each company applies different standards to assess risk, which is why it’s important to compare rates of different insurers.”

Current health

Adam Hyers, Hyers and Associates, Inc. owner and insurance agent
“The number one factor in determining rates are conditions with higher mortality rates.  Any conditions associated with an earlier death will be cause for higher premiums or no offer of insurance at all.  Actuaries and underwriters are very careful with chronic conditions that may reduce someone's life expectancy.”

Travis Price, licensed income protection agent
“Obesity plays a major role in determining your rating class. The higher your BMI, the more likely that you're going to be in a higher rating class or even denied. This is true even if your health is perfect except for your weight.”

Laranie Sookhoo
“Life insurance companies care about the kinds of illnesses that will lead to an early DEATH. They don't care if you have medical issues that make you uncomfortable or affect your quality of life. So, things like back pain and knee pain are of no concern UNLESS these are issues because you have a disease like Lupus or MS. If your back or knee hurt due to an injury or arthritis, then it won't matter. Rheumatoid arthritis is a concern, however.

Diabetes is not usually a problem if it is controlled, but if it is uncontrolled and the applicant has already experienced complications like an amputation or needing kidney dialysis, then that person will need to apply for a guaranteed issue policy.”

Personal and family health history

Andrew Chen
“If you or your family has a history of illness that increases the risk of death during the policy period, you'll pay higher premiums.”

Brian So, Brian So Insurance founder
“Your medical history plays a huge role in qualifying for life insurance. If you've had major illnesses in the past (e.g. cancer), the underwriter would want to know more about it. He may gather more information from your family physician or specialist. If the underwriter determines that you are at a higher risk for death than the average person in your age range, it will add a rating to your policy or decline your application for coverage.”

John Holloway
“An applicant's health history is going to have the biggest impact on premiums. Any current or past health conditions can have an effect on the rate. Some things that people are often not aware of that can affect an underwriting decision are: past medications, current medications, driving record, family medical history, and medical history. These factors can cause the applicant to be moved into the next rate class, which will mean a higher rate. In some cases, applicants are declined for a combination of these factors. For example, untreated high blood pressure combined with a family history of heart disease.”

Medical Exam

Andrew Chen
“You'll have to take a health exam as part of the underwriting process. Your health assessment from this exam will impact your premium.”

Travis Price
“For those cases that are fully underwritten, the medical exam has the most influence over the premiums you pay. In the event that you go to a simplified issues policy, the MIB (Medical Information Bureau) is vitally important. It gives essential information and prescription checks to determine eligibility and rating classes.”

Back to Underwriting Factors

Lifestyle

Jared Weitz
“Your health and lifestyle will play a large part of the underwriting process. If you’re an avid bungee jumper or travel to dangerous places often this will place a burden on your rate.”

Job

Andrew Chen
“If your job is a risky or hazardous one (e.g. police, pilot, construction worker vs. office worker), then you'll likely face higher premiums.”

Hobbies

Brian So
“Factors that negatively affect your insurance premium include participating in high-risk avocations like skydiving and heliskiing, use of narcotics, incarceration, and major driving infractions. These will all make the underwriter think twice before offering you insurance coverage.”

Andrew Chen
“If you have unnecessarily risky hobbies, like freescaling or skydiving, you'll face higher premiums.”

Travel

Emory J. Smith
“Foreign travel to ‘safe’ countries for less than 183 days (six months) per year is generally okay.  Foreign travel for longer than 183 days is typically categorized as Foreign Resident status which limits available rates at most carriers. 

As a rule of thumb, any country where the U.S. State Department has a travel warning is likely not eligible for life insurance through traditional channels. Foreign countries are rated with letters. A-rated countries such as China, Canada, France, United Arab Emirates allow for best possible rates up to 183 days of travel. Lesser rated countries like Iran and Ukraine are still eligible for coverage, just lower rates and shorter durations of travel. 

It goes without saying, but travel to countries with active conflict generally results in decline of coverage.”

Back to Underwriting Factors

Life insurance applications

Applying for a life insurance policy can be intimidating, but understanding how the process works can make it less daunting to secure financial stability for your loved ones.

Before you apply for a policy, make sure that you’ve explored your options and have found the right policy fit. You’ll also want to do your research to know when you’re working with a trustworthy life insurance agent and to choose a reliable insurer.

Whether you’re figuring out which kind of policy is best for you or starting the application process, here are some extra tips that experts offered.

Choosing the right policy

Laraine Sookhoo
“A term life policy is a good solution for parents of young children in the home because their goal is income replacement. Buyers of this product certainly hope that the term will expire without them needing to use it. (Just like we buy auto insurance and hope we never need it.) 

This is very different from someone who buys a final expense policy, who hopes that they still own the policy on the day they die because they want their heirs to have that money to help pay for their funeral and other end-of-life costs. 

Savvy business people often buy larger whole life policies because they can borrow tax free from the cash value accumulated to help them with their business or real estate goals. Some buy universal life policies in an effort to combine insurance and investing. 

If you are clear on the life problem you are trying to solve, it will help you determine which policy might work best for you.”

Finding the right insurer

Chris Abrams
“There are hundreds of life insurance companies in the United States. Work with an independent agent who is familiar with how each company underwrites certain health conditions. That agent should be able to match you to the one company that will be most lenient for your particular situation and therefore will offer the best health rating/lowest premium.”

Completing underwriting

Scott Butler, Klauenberg Retirement Solutions financial planner
“People should know that underwriting is usually, at worst, a very mild inconvenience. You may have to do a paramedical exam, but the insurance company will pay for it. Think of it as a free health check-up. The examiners usually have flexible appointment times and will usually come right out to you.

When you are being asked questions about your medical history, pay attention to each question, answer truthfully and do not volunteer any extra information that is not asked for. If they want to know if your mother had a medical condition before age 65, there is no obligation or benefit for you to tell them about conditions your mother had after 65 or about conditions of your sibling.”

Walt Capell
“Each carrier has their own formula for how they determine if they are going to offer coverage and how much to charge for that coverage. For most people, making small changes such as losing weight, quitting smoking or adopting a healthy lifestyle to lower your blood pressure and cholesterol can help lower premium when quoting a life insurance policy.”

Earl Rubinoff, The Rubinoff Group president and CEO
“A constant annoyance is when an insurance company receives copies of medical records of a person and there are notes in the applicants records that describe a recommendation for the person to go see a specialist or have a specific further medical test performed to rule out any issues and the patient hasn't followed through on this. This is a very simple item that the life insurance applicant can control. People have to realize the more information the insurance company has, the better the rate the person can get.”