How to Get Cheap Life Insurance: A Better Rate Class

Copyright (c) 2010 Mark Manderson

Everyone knows that to get the best term life insurance rates, you have to compare prices before you buy, but what not everyone knows is that even after you apply for coverage, you may need to take steps to lower your rate. To make your efforts efficacious, though, there's something you need to know about how your term life insurance rates are calculated.

In some cases, the term life insurance rates offered after the application process are different from the rates quoted before the application process. No, there's no duplicity at work here (well, at least not on the part of the insurer). The reason for the disparity comes down to a disagreement between yourself and the insurer as to what your rate class (a.k.a. health class) should be. It's typically no call for hurt feelings because the applicant (that's you) was shooting in the dark when selecting a rate class on the life insurance quote form.

When endeavoring to get your term life insurance rates lowered, it won't do to just argue for a lower rate; you actually have to argue for a lower rate class. Term life insurance rates aren't actually calculated case by case, you see. Instead, your insurer employs a number of underwriters, whose job it is to review the cases of applicants and determine the appropriate rate class for each. The rate class is fed into a mathematical formula, and what comes out the other end is the price that the insurer offers you.

How can you get your rate class lowered? The most significant move you can make is to enlist the aid of a life insurance agent, one who has experience with the underwriting philosophy of the insurer to which you applied.—Underwriting practices vary from one insurance company to the next, so it won't do to just have an experienced agent. It's better if he/she is familiar with the underwriting at the company (or companies) in which you are interested.

No, an agent won't increase the price of your insurance. Buying insurance with a life insurance agent is similar to buying a car from a car salesman. You never pay the salesman anything, and in fact, working with the salesman may lower the price of your purchase. Just like the salesman, the insurance agent is paid on commission, but unlike the car salesman, the insurance agent is not employed by the insurer. (Some agents, called "captive" agents, are employed by an insurer, but agents employed by independent agencies are free to choose their own loyalties.)

So what information can an insurance agent use to argue your case for a more favorable life insurance rate? Again, it depends on the underwriting policies of the insurer in question, but almost anything may be of use: your diet, your vocation, your avocations, even your credit history. Do you do vigorous chores around the house? Do you walk the dog every morning? Have any of Superman's organs been transplanted inside of you? These are all clues that you may deserve a cheaper rate class (or in the last case, a psychological exam).