You’re shopping for life insurance policies and you have a high risk situation. Perhaps you have a serious illness or have a dangerous hobby or job? It’s possible that flat extra charges for life insurance will be added to your policy.
Before you think that there isn’t any way possible that you can get approved- understand that each life insurance company looks at your situation differently. Some companies are more strict and some more lenient. This is possibly one of the issues that is most confusing to life insurance shoppers.
Flat Extra Charges for Life Insurance
So what exactly is a flat extra charge (also known as a flat extra premium)?
A flat extra premium is an additional charge or cost that is tacked on to the regular premium of your life insurance policy. This flat extra premium can be added for a short time or the entire life of your insurance policy.
Understanding your Life Insurance Health Class Rating
Before a Flat Extra can be added, your health class rating must be determined.
Rate classes for life insurance are typically what your premium is for a specific insurance amount.
For example, simply use our free online quote calculator- add in how old you are, along with the cost per thousand, and choose a Preferred Plus rate class.
Preferred Plus (also known as Preferred Best) is the absolute best rate a life insurance company offers.
Typically every life insurance company will categorize your rate class into the following 4 health class ratings:
- Preferred Plus / Preferred Best
- Standard Plus / Regular Plus
- Standard / Regular
- Substandard / Table Rated
If you are in perfect health and have no risks you should qualify for Preferred Plus.
As you add any sort of risk, whether it’s a health risk or lifestyle risk, your rate class moves up to the next health class.
The majority of life insurance shoppers fall into these 4 health classes. However, you may require life insurance and have an extreme illness, or maybe you engage in risky activities such as rock climbing.
Now before a company makes their final decision on your policy, be mindful that not every life insurance company approves or disapproves right after an application is submitted. Several of them will need more information to make a decision.
This is a very complex factor when purchasing life insurance, and a big reason to have an independent agent handle this on your behalf.
Life Insurance Flat Extra Example
One method insurance companies use when handling greater health risks is using the Flat Extra Premium or Flat Extra Charge. This is used when a risk is higher than a “Standard” health class risk. The flat extra can be short-term, perhaps 2-4 years, or it can be long-term.
An instance of something that would require a long-term flat extra is if a life insurance shopper has a hazardous hobby or career.
This is a basic example of a Flat Extra premium. Let’s say John Doe was shopping for a 10 year term $500,000 life insurance policy. Based on his age and a “Standard” health class rating, his annual premium should be $500 per year. However, because of his risk, the life insurance company is adding a flat extra of $5 per $1000 of coverage (5 x 500 = $2500). The actual total annual premium would now be $500 + $2500 = $3000 per year.
In this example, if John’s health wasn’t sufficient to be eligible for a standard rate class, the company has a few decisions to make.
To begin, if they think he has a high mortality risk, life insurance coverage can be declined outright. A life insurance decline doesn’t mean that coverage is impossible. As such, we would have to see why he was being rejected. Once that was known, we could shop his case and see if he can obtain a rated policy instead.
When a policy is “Rated”, it is in reference to a premium determination approach named “table rating.”
This is where every table represents a 25% increase above the standard life insurance rate.
Life Insurance Table Rating Example
Table rating is also called “Substandard” ratings. You can get table rated for many health issues if the risk is serious.
Some familiar table-rating scenarios include instances where someone is obese, diabetic, have a mental health issue history, or is suffering from heart disease.
John Doe had a major heart surgery 5 years ago. A life insurance company decided that I was eligible for a standard table 3 rate, that would be 75% higher than the original standard rate of $500 from Example #1.
John’s Standard Table 3 rate would be $500 x 75% (3 Table Ratings) = $875 per year.
FYI, not every company rates off of standard, though.
Some companies rate off standard plus or some other unique rate that only that specific company can calculate.
25% is the typical table rating increase, but there are companies who don’t use it.
|Rate Class / Risk Class||Pricing Result||Cost Rank|
|Preferred Best / Plus||50% of Standard||1 (Least expensive)|
|Preferred||63% of Standard||2|
|Standard Plus / Select||86% of Standard||3|
|Table 1 / A||25% over Standard||5|
|Table 2 / B||50% over Standard||6|
|Table 3 / C||75% over Standard||7|
|Table 4 / D||100% over Standard||8|
|Table 5 / E||125% over Standard||9|
|Table 6 / F||150% over Standard||10|
|Table 7 / G||175% over Standard||11|
|Table 8 / H||200% over Standard||12 (Most expensive)|
Table Ratings and Flat Extra Example
Table ratings and flat extra chargers are not an “either or” situation.
You can actually have both table ratings and flat extra charges applied to your policy.
Let’s say John Doe has HIV and looking to secure a policy. This is a very high risk case and most companies will deny John immediately. However, there are several companies who approve HIV life insurance policies. If you pass underwriting, your policy is typically looking at a Standard Table 8 (200% over the Standard rate) plus a Flat Extra of $2.50 per $1000 of coverage. This flat extra would be long term and for the life of the policy.
For the most part, a short-term flat extra is supplemented to either a table-rated premium or standard rate.
Whatever the outcome is, the method your premium is established is how the underwriter gauges your risk of mortality. Fortunately, even when the conclusion comes with a flat extra charge or is a table rated offer, you’re still getting coverage without limits attached to it.
How to Shop for Life Insurance
For the most part, you can’t simply call an insurance company, apply online, or request special ratings before being approved.
Because you need to qualify for most life insurance policies.
The best way to shop is to work with an independent insurance agent or insurance agency who can help you get coverage for your specific circumstance.
High-risk life insurance is our specialty – the submission process and determining which business will provide the most optimal rate before applying for coverage.
Fundamentally, this procedure is a negotiation with the life insurance carrier.
We attempt to obtain a policy according to the most optimal health rating you can receive, and if a flat extra is necessary, the cheapest flat extra premiums for the extra risk will be undergone.
Because we have strong connections with insurance underwriters and understand which insurers to speak with for adverse risk cases. We can get the most optimal rates for high-risk life insurance situations, regardless of whether you have (or had) a medical condition, or if you engage in high-risk activities like skydiving, scuba diving, or mountain climbing.
The most efficient and quickest way to begin is to get an instant life insurance quote.
Our licensed agents will begin to research and contact company underwriters for you to see who will give you the best chance at affordable coverage. If additional details are needed, we’ll simply reach out to you via email or phone- whichever is most convenient to you. Once we receive all of the replies from the life insurance companies, we’ll present them to you to choose.
Lastly, we’ll help you apply and will update you through the entire application and underwriting process until the final decision is provided. We can even shop your case to make sure it is still the best rate available.
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