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Posted: 23 Aug '11

Should I Accept A Rated Life Insurance Policy?

Sometimes when individuals apply for life insurance the life insurance company will rate the policy.  This means you are being charged an extra amount so the premium will be higher for the same amount of life insurance coverage.

The premium categories available at the time of issue are first male or female rates then the next category divides each of these into smokers and non-smokers.

The underwriting gets more complicated as smokers can be just that, a smoker or with some companies you might be a preferred smoker.  That means you smoke a few cigars each year or whatever the individual company chooses as the definition for preferred smoker.  The preferred smoker would have a lower premium than the smoker and the definition is unique with each company.

The non-smokers can have two lower premium categories and with one company they are referred to as HS3 is a non-smoker, HS2 is a non-smoker in better health and HS1 a non-smoker in great health and a clean family health history.  With each category the premium will be lower.

Now if your health is not that good, you can be rated over and above any of these categories.  So you might be a non-smoker but because of your health the company rates you 100, 150 or 200% above the standard premium.  At 200% you would be paying double the standard premium for your life insurance coverage.

The best way to think about this is that some life or disability insurance is better than no insurance.  So if you're planning to get 1 million dollars of life insurance but you're rated 200% because of a health issue.  Then you might consider taking 500,000 at the premium you would have paid for the 1 million.  The premium is not any higher than you were planning to pay, so you can afford it.  Yes, the coverage is one half, but if something happened 500,000 is a lot more than zero. 

Your future health can go in one of two directions it can get better or worst.  If it gets better you can reapply and get the rating removed and be issued a standard policy.  If your health gets worst, you will become uninsurable meaning that no company will issue you any life or disability insurance at any rate.  If that happens you'll be grateful you took what was offered in the first place.

Health is the greatest asset we have, be thankful for your health today and be optimistic that you can keep it as long as you can.  It is not an asset you can easily replace.  Taking a rated life or disability policy might be the last time you are offered any insurance at all.  Don't let pride keep you from protecting your family or your business.


About the Author - David Motkoski

David Motkoski—At the Helm of Vistaplan Financial Group

The team at Vistaplan is led by David Motkoski, a well-respected insurance adviser to hundreds of business and individual clients. David has 30+ years of experience in this industry helping clients understand their life and disability insurance, office overhead, critical illness, long term care, and accident insurance. David’s focus has been medical doctors, dentists and business owners who are concerned with having the right coverage to provide for their family or business and protecting their income

David is an independent broker offering policies with Manulife, ivari and RBC to name a few. Vistaplan Financial Group has clients dating back to 1983 and they stay loyal with David because of the strong relationships he builds.