High-Risk Life Insurance: Coverage Options for Higher-Risk Individuals

In most cases, high-risk life insurance is no different than traditional life insurance, except that it costs more due to added health, age and lifestyle risks. While some traditional policies can range into the millions for death benefits, high-risk policies are generally for lower amounts.

Insurance companies have a complex rating system for each type of life insurance. It involves several factors that create a rating for an applicant, which determines how much you’ll pay. High risk candidates are assigned the lowest rating, known as a substandard table rating, which is how life insurance companies standardize their ability to add premium to a policy based on added risk identified during underwriting.

Here’s an example. You have a policy that is approved at a standard rate, which means you’re pretty healthy and it costs $100 per month. If you had some pre-existing health conditions that showed up during underwriting, the insurance company may still approve you, but they could add a table rating which would serve as a multiplier to increase the premium. In this example, a standard table B offer for the same coverage would likely be 150% of the standard premium of $100, bringing the total cost to $150.

There are multiple table ratings to allow various stages of underwriting approval.

However, health conditions are not the only factor that can put an applicant into a high risk status.

Factors Affecting Eligibility

Life insurance companies use several factors to develop a risk profile, which is then used to determine whether or not they offer a policy and, if so, at a risk-appropriate price. Insurers apply different weighting and factors, but some are standard in all cases. Those factors include:

Age. Younger policyholders statistically live longer, meaning less risk to an insurance company. However, if you’re in your 60s, 70s or 80s, you present a much higher risk of dying, creating a higher risk to the insurer.

Health and medical history. For most policies, you’ll provide your health history and current medical issues and take an exam so that an insurer can get an accurate picture of your health. High-risk conditions such as heart disease, organ transplants, cancer, kidney disease and smoking mean you’ll pay more for coverage or be denied a policy. If you have a multi-generational history of severe illness or hereditary disease, that may also result in higher premiums.

Occupation. If you’re in a high-risk job, such as a commercial fisherman, firefighter, pilot, police officer or some construction workers and trades, you’ll pay more for coverage. If an insurer considers your job too dangerous, they may not offer you coverage.

Lifestyle. If you regularly engage in dangerous hobbies such as mountain climbing, scuba diving or skydiving, you’ll also land in a high-risk category. Heavy drinking or tobacco use could also impact your costs.

Gender. Males are considered at higher risk than females due to a lower life expectancy.

Rate Classifications

Insurance providers assign applicants risk classes based on the above factors to determine if a policy should be offered and how much in life insurance premiums to charge.

Super Preferred Risk Class

People in excellent health that don’t engage in risky hobbies or dangerous occupations are placed in a super preferred risk class. This has the lowest premiums, but only a small percentage of people qualify for this rating.

Preferred Risk Class

Some people end up in the preferred risk class. People who qualify for this risk class have a similar profile as someone in the super preferred class and are in good health but may be taking medication to treat a condition such as high blood pressure, are slightly overweight or have a family history indicating a higher risk.

Standard Risk Class

Most people fall into the standard risk class. These people have a higher body mass index (BMI), take multiple medications or have potential health issues and may engage in some risky occupations or lifestyles.

Substandard Risk Class

Life insurance for high-risk applicants always land in the lowest risk class, called a substandard table rating. Insurers use a table of letters or numbers to classify policyholders who are considered substandard. It is used for those with significant health conditions, who routinely engage in risky hobbies, lifestyles or have a dangerous occupation, heavy tobacco use or drinking or similar issues.

If you’re considered a high-risk applicant, you may get turned down for coverage by some companies.

Others may offer you a type of policy with a low limit and a higher rate to offset their risk. In some cases, you may only qualify for a guaranteed issue life insurance with no medical exam. You’ll get limited coverage for the first one to three years the policy is in force, but you will pay a much higher price for the least affordable high-risk life insurance.

Term life insurance coverage is often easier to get than permanent life insurance coverage and at a lower cost. Because coverage varies so widely, your best bet is to work with an independent life insurance agent who knows which providers offer high-risk policies and which of these is the best option for your particular risk factor.

Finding the right life insurance policy is hard, and even more so when you land in the substandard risk class for high-risk applicants. Here are a few considerations to help you get adequate coverage for a reasonable cost.

Work With a Professional

As a high-risk applicant, your best bet is to work with an experienced independent agent or broker. They understand the challenges and will guide you to the best options for providers, coverage and cost based on your specific circumstances.

Understand Underwriting Differences

Understand that high-risk coverage varies by provider in the insurance industry. Each company assigns life insurance underwriting risk differently, and what may be considered a high-risk factor for one may not be considered high risk for another. Companies also price various high-risk factors differently. Some also have certain policy exclusions and waiting periods, especially with no-exam life insurance guaranteed issue policies. Insurers also have different death benefit limits.

Consider a High-Risk Insurance Provider

There are also some insurance companies who specialize in high-risk policies. They are more likely to accept your life insurance application and give you more affordable life insurance rates if they specialize in the type of high-risk life insurance that applies to your situation.

While you may not be able to simply change your job or your passions, there are ways to overcome the challenges of purchasing life insurance as a high-risk applicant.

Get Multiple Quotes

Getting life insurance quotes from several companies is especially important if you’re a high-risk applicant. Insurance companies vary greatly on how they classify high risk, and the same policy can have much different premiums.

Get Coverage Through Your Employer

If you have an employer that offers group life coverage, you might get cheaper coverage than on your own. This is common in high-risk occupation employers who want to protect employees who may have difficulty getting individual coverage.

Combine Smaller Policies

Employers may offer a small amount of life insurance coverage at no cost, but this basic coverage is often inadequate. You can buy a smaller amount of coverage independently to provide the total amount you want, saving money on premium costs through this layered approach by tapping into group rates.

Modify Your Lifestyle To Reduce Risks

Another way to overcome high-risk challenges is to modify your lifestyle or medical risks. If you can lose weight, improve your overall health, quit smoking and reduce drinking, you could move higher on a table rating or be reclassified out of a substandard rating completely.

And there is always the option of moving into less risky hobbies or a less risky career. While that probably doesn’t sound like a good option on its face, your specific situation may make it a viable alternative.

If you are considered a high underwriting risk, you may face certain challenges that make getting life insurance coverage more problematic. However, there are strategies you can employ, ranging from reducing your risk profile, applying for a guaranteed issue policy and working with a broker to give you the best rates for optimal coverage. No matter which route you take, be sure to get multiple quotes to ensure you find the right coverage at a competitive price.