Understanding your life insurance quote

Today is the best day to apply for life insurance. That’s not an opinion. That’s a fact.

Here, we’ll explain: You’re younger today than you will be tomorrow. And there’s never a better time to buy term life insurance coverage than when you are young and healthy.

That’s when insurers tend to charge you a lower monthly premium, on the theory that you will be paying those premiums years, even decades, into the future. You get a low rate when you’re young and healthy, the insurers get a low-risk customer, and everybody wins.

Sounds simple, and it kind of is. But before you race to get a bunch of quotes for coverage, there’s something you should know.

Not all life insurance quotes are created equal.

A quote is an estimate on how much you’ll pay for coverage, aka your final rate or premium. But a premium, that’s determined by a rate class and…okay, it looks like we might be losing you. Let’s back up.

Each insurer uses what are called life insurance rate classes — basically, groups of policyholders who carry a similar amount of risk. And while you’d think being young and in excellent health would automatically put you in the best rate class, it turns out best rate class criteria varies considerably from insurer to insurer.

Some might have stricter rules around, say, marijuana usage. Some might have different definitions of health issues — some might use blood pressure or body mass index, for example, while others rely on a different set of statistics.

So just because you’re a card-carrying member of Ultra Preferred Super Elite Extra Special Status at Carrier A, that doesn’t mean you’ll be considered the same at Carrier B. Each insurer uses different actuarial formulas and algorithms to assess a potential customer, and that info is proprietary intel they don’t want to disclose. A trade secret, if you will.

But in the spirit of transparency, let’s break down how this works at Haven Life so you can use this information to help buy the best coverage, at the best price, for you.

What are life insurance rate classes and how do they work?

You are one of a kind (unless you’re a triplet or something). But there are limits to how familiar your insurer can get with your unique qualities.

During your life insurance application process, an insurer will get a broad picture of your health — including your age, your hobbies, your medical history, and any issues that might come up during a life insurance medical exam — and then place you in a group with other individuals with a similar level of risk.

Those groups are called rate classes, because they are used to set your rate (also known as your monthly premium payment) for your life insurance policy. Think of rate classes as existing on a spectrum, from high-risk to low-risk. The higher your risk, the higher your premium payment will be. The lower your risk, the lower your premium.

Again, every insurer does this differently. (That’s what keeps actuaries in business.) Just because you are in a great (low-risk) rate class for one insurer, doesn’t mean you’ll be in the preferred rate class at another one.

For example, the Haven Term policy uses a total of five rate classes. The best of those is called Ultra Preferred Non-Tobacco. If you are young and healthy, there’s a good chance you would fit into this rate class and pay our lowest price for coverage.

How to use rate classes to better compare life insurance quotes

Maybe we should start with: What is life insurance, anyway? (If you’ve read this far without knowing that, thanks for sticking with us.)

Essentially, life insurance is a type of insurance that provides a lump sum death benefit to your loved ones if you die during the policy. There are many types of life insurance, but the two main ones are term life insurance and permanent life insurance (including whole life insurance).

Term life insurance covers a set number of years (the term). It’s typically more affordable, because it’s designed to cover the years when you’re young and in good health, and more likely to have someone (like kids) who depend on you to pay for things. Permanent life insurance is, well, permanent — it lasts until you die, and typically has higher premiums as a result. (It also can accrue cash value, which is when things start to get complicated, but that’s another reason why it costs more.)

So when you’re comparing quotes, keep in mind that a permanent life insurance policy will almost certainly cost more than a term life insurance policy, even if the amount of coverage is the same.

If you have a pretty good sense of your overall health conditions and how much coverage you need, your life insurance shopping journey can proceed to getting a few quotes for an estimate of your life insurance premium.

But what about rate class for your life insurance policy? Short of applying for life insurance four different times, how can you get an idea of what rate class you might fit into and how strict the carrier’s underwriting guidelines are? Ultimately, this answer will determine how likely it is that your quote will match your final price.

As with so much in life, at least in grades K through 12, it starts with doing your homework. Before you apply for life insurance coverage, pick up the phone (or click “compose email”) and ask the agency you’re thinking about applying through how many people get their best rate. They might not want to tell you, or they might not be able to tell you, but file this under “doesn’t hurt to ask.”

Now that you’re an official “savvy life insurance shopper” (there should really be a badge for that), get a quote, ask some questions and find yourself coverage with confidence.