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.
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