ever wonder how life insurance companies comeup with your monthly payment amount? and why it might be different for similarpeople? well, youâ€™re not alone. life insurance paymentsâ€”or premiumsâ€”aredetermined by a process called underwriting. youâ€™ve probably heard the word before, buthow many people really understand what it means? underwriting is simply the process insurancecompanies use to determine how your health, lifestyle, and risk profile compare to a statisticalnorm. the closer you compare to normâ€™s, the closeryour premiums will be to the standard rate for specific insurance coverage.
underwriting is designed to help give everyonethe fairest price possible. letâ€™s take ryan, for example. he wants toget some term life insurance so michelle and the kids wonâ€™t fall on hard times and possiblyeven lose their home if he dies. when he talks to his insurance agent abouthis needs, they decide to look at $500,000 20-year term life insurance policy. ryan is provided with a quote at a standardrate class...based on the norm. but after submitting his application and underwriting,the cost actually goes down. what gives? there are many different rates for availablefor life insurance...from healthy low-risk lifestyles -
what we call preferred elite - to rates forpeople with health and other risks. when you apply, your results will be usedto determine your rate class and the premium you pay. you can be declined if you have a serioushealth condition. on the other hand, if youâ€™re in excellent health, your rate could be better. either way, your cost is primarily determinedby your medical history and a physical exam that's typically required, though your occupation,hobbies, and driving record are also factors. for example, if ryan reports on his insuranceapplication that he is being treated for high blood pressure, but his exam shows itâ€™swell controlledâ€”and heâ€™s otherwise healthyâ€”he
might qualify for a better than standard rateclass. this explains the difference in his quotesbefore and after underwriting. what can you expect? when you contact your insurance agent, youâ€™llget a quote based on some preliminary information you provide. when you fill out an application, youâ€™llbe asked questions about your health history and likely be given a contact at a medicalexam company who will visit you in your home or officeto collect blood and urine samples; take height, weight, pulse, and your blood pressure; andif needed, request an ekg.
with allstate, once the exam is complete,youâ€™ll get an online personalized wellness report with your exam results and an explanationof what they mean in plain english. the wellness report provides recommendationsfor leading a healthier life and a summary that can easily be shared with your doctor. plus, youâ€™ll have an understanding of howyour life insurance cost was determined. once you accept your policy, your life insurancerate is locked in, even if your health declines. but if your health improves over time, youmay be eligible to improve your underwriting rating class. itâ€™s nice when things are one wayâ€”yourwayâ€” right?
so there you have it. life insurance costsmade simple. learn more today!