How to Lower the Rate on an Existing Life Insurance Policy After Health Improvements
If you have life insurance and when you first applied you were in less-than-perfect health, you may be wondering did I make the right move?
Maybe you wanted to lose weight, had blood pressure that was a high or had a smoking habit you needed to kick. But you didn’t want to delay getting coverage in hopes of improving your health.
If so, you likely didn’t get the best available rate from your insurer. That’s because your health has a big impact on the amount you pay for coverage.
The good news:
You might be able to get a lower rate if your health has improved since you bought the policy. Many insurers allow for what is called a reconsideration or re-rating.
The reconsideration process can be worth your while if your rate is lowered. Here’s how to increase your chance of success.
How Insurers Determine Your Rate/Health Ratings
Life insurance companies determine your premiums based on your health rating. There are four basic ratings for applicants who are in average health or better.
- Preferred Plus – This rating carries the lowest premiums and is reserved for those who are in excellent health, have proportionate weight for their height, and no family history of major illnesses prior to age 60.
- Preferred – This rating will get you the second lowest premiums, and requires excellent or very good health, and only minor health conditions.
- Standard Plus – Requires good health, no family history of major illnesses or health conditions before age 60, and may include overweight (but not obese).
- Standard – Requires generally good health, though there may be family health issues, and may also accept overweight (but not obese).
If you have significant health conditions, and don’t qualify for a Standard rating or above, you’ll be given a substandard rating, which is based on what are known as table ratings.
Table ratings are so called because premiums are based on several ratings – usually 10 or so – from a table. They’ll start with a Standard premium rate, then increase your premium based on the table rating you’re assigned, in increments of 25% per rating.
For example, if your table rating is 1, you’ll be charged 25% above the Standard premium rate. If it’s 2, you’ll be charged 50% above the Standard premium rate. Because the premium increases by 25% for each numeric increase in the table, you’ll pay a premium of 250% above the Standard premium rate if you are assigned a table rating of 10.
The table rating will be determined by the specific health conditions you have, and the degree to which your health departs from a Standard premium rating.
The table ratings are decided disadvantage in determining your premium, but the number of ratings each company has offers an opportunity for you to lower your premium by lowering your table rating.
Reasons You Might Qualify for a Lower Rate
Though most consumers aren’t aware of this, and your life insurance agent probably won’t tell you, it is possible to get a lower rate on your life insurance premium even after your policy is in force.
Life insurance companies will consider lowering your premium for certain improvements in your health, which were the cause of the higher premium in the first place.
For example, there are common reasons why you may receive a substandard/table rating that may be within your control. Those include smoking, obesity, a high-risk occupation, high-risk hobbies, drug or alcohol use, a poor driving record, hypertension, and any number of other conditions.
To lower your premium, you’ll need to improve your health profile.
But you’ll need to discuss the specific steps with your insurance company. Not all companies may be open to reducing your premium for improvements in your health or reductions in your risk profile.
How to Get Your Insurer to Reconsider Your Rate
The first step is to determine the reasons why your premium is as high as it is.
Start by finding out exactly what rating the insurance company assigned to you at the time you took your policy.
For example, if you were assigned a substandard rating, with a table rating of 3, get a list of the reasons why you were assigned that rating. Once you know what the contributing factors are, you can zero in on the strategies you’ll need to implement to improve your health.
For example, let’s say that the reason you were assigned a table rating of 3 is because you are 80 pounds overweight, considered obese, and have both hypertension and sleep apnea as a result.
The insurance company may have a program that will allow you to reduce your premium by improving your health. But you’ll have to find out exactly what those steps are.
For example, they may require you to join a formal weight reduction program. If so, you’ll need to join a program that’s on their approved list. The purpose of the program will be not only to help you lose weight, but also to track your progress.
Even so, don’t expect results overnight. Just because you lose 80 pounds in six months doesn’t mean the insurance company will automatically lower your premium.
Typically, they not only require that you lose the weight, but also have been successful in keeping it off for a certain minimum amount of time. That may be one year, two years, or even three years.
The insurance company will want to know that the weight reduction is for the long term.
Though the delay means you will continue to pay the original high premiums, it will also give you an opportunity to reap the benefits of weight reduction. It’s possible that during the waiting period you may experience an improvement in your high blood pressure and even the disappearance of your sleep apnea.
The insurance company may recommend a smoking cessation program you can join to help you quit.
But once again:
You’ll need to be smoke-free for a certain minimum amount of time.
And even after that time frame has passed, the company may still charge you a higher premium, though it will be lower than the original premium you’ve been paying from the beginning of the policy.
If a hazardous driving record was one of the main reasons for your substandard rating, you may need to go a certain amount of time without any moving violations or at-fault accidents.
In most states, your driving record will be wiped clean after three or five years. It’s likely this will be the minimum required by the insurance company to improve your insurance rating.
How to Prepare for a Medical Exam
It will be common for life insurance companies to require you to submit to a medical exam after completing any kind of health improvement program. You’ll naturally want to be in much better health at the time of that exam than you were when you first took the policy.
Even though obesity may have been the primary reason for the higher rating, you’ll want to make sure that you’re otherwise in better health than you were when you took the policy.
For example, while you are losing weight, you should take advantage of the waiting period to monitor your overall health. That means getting regular checkups from a physician and addressing any health conditions. It may be that part of the reason for your high rating was that your hypertension was untreated at the time you took a policy. But if you can get on a treatment regimen, and lower your blood pressure on an ongoing basis, you’ll be better prepared for the life insurance medical exam.
The basic strategy should be to eliminate as many of the health conditions that caused the table rating in the first place.
You’ll want to be sure each condition has either been eliminated or is currently under control going into the exam.
Also, be aware that the insurance company may require you to submit to exams at regular intervals.
For example, if the main problem was obesity or smoking, they may require a follow-up medical exam in two or three years to make sure you’re still on track.
How Much You Can Save
The savings from improving your health can be substantial.
Let’s say that you have a table rating of 3, and an annual premium of $3,500 on your life insurance policy.
If by improving your health you can change your rating from a table rating of 3 to a Standard rating, your premium will drop down to $2,000.
That’s because with a table rating of 3, your premium was increased by 75% above the Standard rate ($1,500). With the reconsideration, and the removal of the substandard table rating, you’ll get the benefit of the lower Standard rating.
Life insurance premiums aren’t set in stone.
If you have certain health conditions or habits that caused you to have a higher than normal life insurance premium, many – but not all – insurance companies will give you an opportunity to lower your premium by improving your health or eliminating the bad habits.
Since the savings can be substantial, it’s always worth investigating the possibility. Just make sure you find out exactly what the approved process is from the insurance company before taking any concrete steps.
If improving your health fails to succeed at lowering your premium, you could also consider lowering the death benefit on your policy or eliminating certain policy riders that may be increasing the cost of your premium.
But only do this after you’ve determined that improving your health won’t get the job done.
After all, once you lower your death benefit or eliminate riders, you may not be able to add them back later.