How To Get Accurate And Meaningful Life Insurance Quotes

Understanding How Your Personal Information Affects Your Rate

How To Get Accurate And Meaningful Life Insurance Quotes
December 29, 2015

Consider the assumptions that are built into the title of this article. Here is one of them: you can get quotes that are neither accurate nor meaningful to you. Here is one more: inaccurate quotes can lead to confusion, frustration, and wasted time. So, how do you get life insurance quotes that you can understand and feel confident about? A closer look at one of the elements of your quote may help you decipher quote information better.

Exactly what “elements” am I referring to? Among other details, term quotes show a death benefit, the length of the term, the rate class, the level period of time the premium is guaranteed for, carrier ratings, payment modes and product names. Of all of these, the one that brings the most angst to life insurance shoppers is the health class or rate class.

Life insurance sellers providing quotes can ethically respond to a consumer’s request by asking a few questions rather than immediately sending quotes and an application. At Term.com, we receive thousands of quote requests yearly, mostly via online search forms. We contact each person, starting with a brief needs analysis, before touching on the concept of rate classes and what they can mean to the life insurance shopper.

Getting to the cost of coverage without first addressing rate classes would invalidate any price information that we might offer. Here’s why: A rate class is a bracket showing the cost of coverage for an applicant. At the quoting stage, it is based on information we gather as we ask questions. At the underwriting stage, it is based on mortality information obtained by the carrier. You may see, depending on the carrier, three or four rate classes (brackets): Preferred Best, Preferred, Standard Plus, Standard, and then Table ratings added to Standard approvals (Tables 1 through 10).

Imagine that we are talking on the phone. You are holding a quote from elsewhere with a monthly cost of $56. You want to know if you can do better on price. Trying to keep things equal, I ask you about the rate class of the quote you’re holding. You respond with “I don’t know” as your best answer. That tells me a couple of things. One is that no one discussed this important element with you, and it tells me that the info is likely inaccurate and, therefore, not meaningful. This is because, unlike with many things that you purchase, life insurance premiums are not “settled” at the front end, but only after some information is obtained about you. Even with “no exam” life insurance, this is true.

Let’s take a closer look at rate classes. I ask about height and weight. You tell me that you are 5’9” and 225 lbs. I look at the height/weight chart for my most lenient carrier and you qualify for the Standard rate class. All things being equal on the quotes, your premium will be $71 per month. You are holding a Preferred Plus rate quote. With your height and weight, you will not qualify for that rate class, but you want to believe that $56 is accurate and meaningful for you. You see it in writing so you accept it as gospel. The truth is that the binding determination of your rate class happens at approval, not at the quoting stage. Quotes are accurate only to the degree that you fit that particular bracket.

So, are quotes meaningless? No. Carriers give sellers information to “field underwrite” your coverage, but we must possess the will and the skills to find out which bracket you best fit into and then quote rates based on that finding. When holding a quote that does not fit your profile, unrealistic expectations can set the stage for disappointment. If the cost increases at approval, it will feel like someone lied to you.

How do you avoid this? You are reading this article, which helps. Then, ask some key questions when obtaining quotes. For instance, “Is this quoted price something that can change when they get my medical records?” Or, “Will the information I share about myself have an effect on the cost?” Share the same info with a couple of advisors and keep an eye on the rate class so that comparisons at the same class can help “shake out” the differences in cost from one carrier to the next.

The fact is that quotes don’t influence underwriters. Your rate class, as I tend to say, is buried somewhere between the pages of your medical records. Do we lose a number of prospective customers when we don’t quote the lowest numbers immediately (the poorly-matched Preferred Best rate numbers that merely entice you to buy)? Yes, we do. Were we going to lose them later anyway when the “bait-and-switch” approach made them angry? Yes, we were. Sometimes, I will give the worst-case numbers knowing that there is a great chance that the approval will look better than my quote, which is a very nice outcome.

When asking for a quote, it is important to treat the initial steps not as a buying situation, but as a moment to learn some things that will help you with your decision. After all, what good are price quotes that have no relation to what you may actually qualify for? Right at the beginning is the perfect time to get the quote that matches your profile, based on your specific situation. Only then will the numbers actually be meaningful to you. The result will be that you avoid confusion, frustration, and wasted time.


Photo ©iStock.com/Courtney Keating

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Meredith L | 12.29.15 @ 16:04
I believe it's absolutely critical to actually talk to the agent. Let them know exactly what your goals are - like if you're using the insurance money for savings or for end of life. Speaking to them will help navigate the avenues you can or ought to pursue
Carla Truett | 12.29.15 @ 16:05
The more I read the quotes I get, the more confused I become. Thanks for explaining a bit.
Erin | 12.29.15 @ 16:08
This is great information. We need to review our life insurance policies, and this will be helpful in determining if we have the correct coverage at the right price. Thank you!
Steffanie | 12.29.15 @ 16:10
Great information and something to think about when shopping around. I always feel better if I can talk to an agent in person.
Christina | 12.29.15 @ 16:12
Insurance as a whole seems to be set up to "bait and switch". Just like anything else you buy, you need to do your research, and part of that is consulting with a knowledgeable professional in this case. Everyone's circumstances are different.
Alec | 12.29.15 @ 16:15
I don't have this insurance yet but I'm hoping to look in to it soon so I know my expenses won't fall on my family and daughter. I never really knew how the quotes worked, but now that I know it's more health based than I thought, it's incentive to lose a little more weight before I start looking around.
Elaine | 12.29.15 @ 16:20
These hints just confuse me and actually talking to someone makes it worse.
Sarah | 12.29.15 @ 16:22
Insurance, especially life insurance, is rather hard to figure out. So many loops and such.
Debbie | 12.29.15 @ 16:23
I really need this kind of information. Thanks
For Christina re "bait and switch", reducing the whole of insurance to one facet of life insurance assumes that all types of insurance work the same way. Here is a solution for avoiding the "bait and switch" thing when looking at life insurance. You will like this one! Let's say that you are insurable, that you are healthy, and there is nothing else lurking in your history to keep you from being covered. Ask your advisor for costs associated with ALL of the brackets mentioned in the article, except for Table Ratings (remember, you are healthy). One of those is, without a doubt, your rate class. Apply with no money, just the application. Apply for more than you want. Then, when you are approved, you will know the actual rate class, since assigning a rate class is the job of underwriters. Now that you have your actual rate class, you are done with guessing. Choose to go with the coverage amount applied for or reduce it to fit your budget. Done this way, you have risked nothing - but gained an actual rate class conclusion and the power to set your own budget as part of the purchase. No baiting and no switching!
Elaine, when you have a moment, think about what you need. Ask for it plainly. Follow the advice to Christina, above, and make decisions based on what you can afford. Once you have coverage in place, you will have security. Your needs may be basic. If they are, you will need 10 minutes to figure it out. I will never sell life insurance to Elaine. Elaine, if you want a clear explanation, let me know and we can take it as slowly as you want it to go until you get it. Take a look on MoneyTips to find my info.
For Sarah, please forgive the analogy, but here goes: on this trip you will never sit in every seat on the plane. Only one of them is your seat because it fits your needs. You want the window seat close to the front of the plane on the port side? Investigate just that seat. Leave the other 199 seats alone. It is much easier to delve into what that seat is all about than to delve into what every seat on the plane is all about. Life insurance is confusing when we try to gather and then compare information about ALL of the "seats" that are available. Who wouldn't be confused!!
brittany.martinez530 | 01.11.16 @ 17:46
This is extremely useful and crucial information for people who are looking into getting life insurance policies.
$commenter.renderDisplayableName() | 12.06.16 @ 10:30
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