What Is a Table Rating in Life Insurance?
Learn how life insurance underwriting accounts for diverse health profiles, affecting your coverage cost and eligibility.
Life insurance serves as a financial safety net, providing security for loved ones in the event of a policyholder’s passing. Insurers use underwriting to determine policy eligibility and cost, evaluating an applicant’s risk profile to predict the likelihood of a claim. This risk assessment is fundamental to the insurance industry, influencing policy approval and premium rates. It ensures the cost of coverage is proportionate to the risk assumed by the insurer.
Understanding Table Ratings
A table rating in life insurance is a classification assigned to individuals who present a higher risk than those in “standard” health categories, yet are still considered insurable. This classification allows insurers to offer coverage to applicants with certain health conditions or lifestyle factors by adjusting the premium to reflect the increased risk. While “preferred” and “standard” classifications represent average or better-than-average risk profiles, table ratings specifically address sub-standard risk categories. Each level indicates progressively higher risk and cost.
The purpose of a table rating is to provide a pathway to coverage for individuals who might otherwise be denied traditional policies. Instead of outright rejection, the insurer quantifies the additional risk and incorporates it into the policy’s pricing structure. This approach broadens access to life insurance, enabling more people to secure financial protection for their families.
Factors Influencing a Table Rating
Life insurance underwriters conduct a detailed assessment of an applicant’s profile to assign a table rating. This process involves evaluating medical history, which includes chronic conditions, past surgeries, and family history of illnesses like heart disease or cancer. For example, conditions such as diabetes, obesity, high blood pressure, and a history of heart attack or stroke are common health factors that can lead to a table rating.
Beyond medical considerations, lifestyle choices also play a significant role in the underwriting decision. Factors such as smoking or tobacco use, engagement in high-risk hobbies like skydiving, or employment in dangerous occupations can increase an applicant’s risk profile. Underwriters also consider driving records, looking for citations or offenses that might indicate a higher propensity for risk. The assigned table rating results from a holistic review, aggregating various risk points to determine overall individual risk.
The Impact of Table Ratings on Premiums
A table rating directly influences the cost of life insurance premiums. Insurers commonly use scales such as Table A to P or Table 1 to 16 to denote the level of increased risk. Each step down the table corresponds to a specific percentage increase in the premium above the standard rate. For instance, a Table 1 (or Table A) rating means an additional 25% on top of the standard premium.
This percentage increase accumulates with each subsequent table. For example, a Table 2 (or Table B) rating results in a 50% increase, and a Table 4 (or Table D) rating means a 100% increase over the standard rate. If a standard premium for a policy is $100 per month, a Table 1 rating would increase it to $125, while a Table 2 rating would raise it to $150. While specific percentage increments vary between companies, 25% per step is widely observed.
Navigating a Table Rating
Receiving a table rating means the cost of coverage will reflect a specific risk profile. Applicants have several options when faced with a table rating. One approach is to accept the policy with the adjusted premium, securing immediate coverage for their beneficiaries. This can be a practical choice, especially if the underlying health or lifestyle factor that led to the rating has the potential to improve over time.
Another option is to seek re-evaluation of the rating. If new medical information becomes available or the initial assessment was incomplete, an applicant can request a review. Some insurers allow policyholders to request a reevaluation after a certain period, typically one to two years, if their health has significantly improved. Exploring alternative life insurance products or carriers is also worthwhile, as underwriting guidelines and pricing vary among companies.