As enticing as a low quote on life insurance is, it’s a preview, not the whole story. And life insurance websites that tout the lowest quote will not always guarantee the lowest monthly rate.

Why? Because not everyone who buys a life insurance policy is going to pose the same risk to a carrier providing coverage. Insurance carriers need to keep risks minimal to ensure everyone gets a fair premium.

And how do they do that? With risk classifications. These determine what you’ll pay based on how likely the carrier will have to pay out to your loved ones in the event you pass away.

Life Insurance Risk Classifications

When the life insurance company approves your application, their underwriters assign you a risk classification largely based on your health questionnaire and medical exam.

Classifications are made up of people who share the same characteristics that pose a specific level of risk to the company of paying out a death benefit sooner rather than later. The standard risk classification is the baseline. People in preferred risk classifications have the least risk characteristics and pay the lowest premiums; people in the substandard risk classifications have the highest risk characteristics and pay the highest premiums.

It would be great if the life insurance industry used the same names and requirements for these classifications, but they don’t. However, this may be to your advantage.

Why?

Because some carriers have strengths their competitors don’t when it comes to these classifications.

One company may consider a BMI of 25 to be optimal and therefore place it in the risk class with the lowest premium; another may see it as acceptable but put it in a risk class with a higher premium.

One company may classify your annual scuba diving trip in one risk class and premium and another company may place it in a higher risk class with a higher premium.

It all depends on the carrier.

It gets even more complicated when you factor in table ratings.

Life Insurance Table Ratings Chart

Anyone who falls below standard risk is placed in the substandard risk classification and will pay more than the standard risk rate. How much more will depend on their table rating. Substandard risk is where the table ratings kick in.

Underwriters use a life insurance table ratings chart to assess how much those who fall into substandard will pay above the standard rate. Increases generally occur at increments of 25%.

Table rates are identified by numbers or letters. Some carriers use numbers and some use letters. But basically, if you are table rated 1 or A, you will pay 25% more than standard rate, 2 or B 50% more, 3 or C 75% more and 4 or D 100% more and so on.

So let’s look at a table rating in action.

Mary is a 35-year-old woman looking at the average life insurance cost per month for a $1 million life insurance policy. She is looking at a 20-year term policy.

She got a quote of $27 per month from Company A.

Mary admitted she smokes when she got the quote. The medical exam she underwent during underwriting claims she’s in otherwise good health. But her driving record reveals she’s had a couple of driving tickets in the past year. (Yes, those do count.)

Company A places her in a substandard risk classification because of her smoking. So, she’s already going to pay more than a nonsmoker. However, they consider her driving risky behavior and give her a Table 1 rating, which adds 25% to her rate. So now, rather than paying $324 per year, she’s paying $405.

Company B quoted Mary $29 per month but doesn’t consider two tickets to warrant a table rating. She ends up paying $348.

Had she gone with the lowest quote, she would’ve ended up paying more than she would if she’d gone with a higher quote.

A low quote is a great place to start. But they can be misleading. You want to collaborate with a company that gives you the whole story.

Can you get life insurance if you have diabetes? Absolutely. You need it.

Diabetes is no joke. According to the Centers for Disease Control and Prevention, 16% of adults aged 20 and older are living with diagnosed or undiagnosed diabetes. More than 100,000 people died of it in 2020. It’s currently ranked the eighth cause of death.

If you’re diabetic with dependents, it’s important you have life insurance to protect you if you’re no longer there to support them. Term life insurance is perfect because it offers protection during the period of life when you most need it—while you’re in your peak earning years and raising your family.

As a diabetic applying for life insurance, it’s important to know what to expect as you shop for the best term life insurance company for you.

How Life Insurance Companies Evaluate Diabetics

Term life insurance provides coverage for a specific amount of time (term) with a set premium and a set benefit payout. For example, you can buy a 30-year term policy for a $250,000 benefit payout with a $25 per month premium.

All life insurance policies and their premiums will vary based on your age and health. The younger and healthier you are the less you will pay. So, diabetics on average pay more than a person without diabetes. How much more you will pay depends on your diagnosis, diabetic health history, co-conditions, and other variables.

As an applicant with diabetes, your health will naturally be looked at closer than someone without it. Expect to at least be asked additional health questions and most likely undergo a medical exam and lab tests. Some of the things life insurance carriers will want to know about include:

• Your diagnosis – this is the one area where the axiom about the younger you are the less you’ll pay doesn’t apply. For diabetics, the older you are when you’re diagnosed the less you’ll likely pay. A diagnosis at an early age may suggest more life-threatening disease.
• Your diabetic health history – They may also request an attending physician statement (APS) to gain insight as to how you’re managing your diabetes.
• Any diabetes-related co-conditions (heart disease, kidney disease, impaired vision, etc.)
• Your sugar levels – A1C levels over 7 may affect your premium.
• Your medications – what you take, how often you take them and for how long you’ve taken them

What to Do If You’re Denied Life Insurance Because of Your Diabetes

Look into guaranteed issue life insurance, which requires no medical exam or health questionnaire and offers guaranteed approval in most cases. The premiums are high, and the coverage maxes out at $25,000, but it provides a cushion for your family to plan next steps in the event your diabetes or related illness takes you away from them.

If your diabetes isn’t severe, try simplified issue life insurance, which has a lower rate and a coverage cap of $50,000. You’ll have to answer some medical questions but again, if your diabetes is less life threatening, it may be worth looking into.

Final expense insurance, also known as burial insurance, is also an option. It will cover outstanding debt and/or funeral expenses so your family won’t be burdened with them.

Like anything else, it pays to shop around. It’s easy as ever to get the best life insurance quotes online for a thorough term life insurance quotes comparison. Then go into the underwriting process confidently, armed with the information you need to get the best deal possible.

They say nothing is sure but death and taxes.

If you’re reading this, you probably already have life insurance or are seriously considering buying a policy to protect your family. And you probably know how life insurance works.

You buy a policy for a certain amount of coverage, say $250,000, for which you pay a monthly premium of say, $25. Should you die while the policy is active, your beneficiaries receive the $250,000 payout.

What you now want to know is, how will life insurance affect your taxes? What follows are some highly simplified explanations for a variety of “death and taxes” situations.

How Term Life Insurance Affects Your Taxes

If you have a term life policy, your beneficiaries won’t have to pay taxes on the payout they receive.

Term life policies are straightforward. You pay a monthly premium for a set amount of time, and you receive a set amount in death benefit. End of story.

But if you expect a tax break on your premium, you’re going to be disappointed. The IRS considers life insurance premiums a personal expense and therefore not deductible.

How Permanent Life Insurance Affects Your Taxes

Because permanent life insurance policies produce cash value, the IRS looks at types of permanent life insurance such as whole life and universal life differently than they do term life.

Interest earned on a permanent policy is tax-deferred, i.e. not taxed if it remains untouched. However, if you withdraw it, it will be subject to income tax.

Life Insurance Annuities and Taxes

If your beneficiary collects your death benefit in installments, the payouts will be considered income and subject to income tax.

Life Insurance and Estate Tax or Inheritance Taxes

If your life insurance policy is wrapped up in an estate, your beneficiaries will owe an estate tax if the estate is worth more than the IRS threshold, which for 2023 is $12 million for an individual beneficiary and $24 million for a married beneficiary filing jointly.

If the estate is worth less than that, they will owe no tax.

Some states levy an inheritance tax. States vary on the threshold so consult a tax attorney in your state to find out what your beneficiaries may or may not have to pay.

Accelerated Death Benefits and Taxes

Although you can use the benefit from an accelerated life insurance policy while you are still alive, it is not taxable.

Transfer for Value Life Insurance and Taxes

If you sell (settle) or surrender your life insurance policy, you will pay tax on any monetary or material value above what’s called the policy basis.

The policy basis is the policy’s cash value minus premiums you paid and required administrative fees. Anything you receive above the policy basis will be taxed as income.

Again, these are highly simplified explanations for situations that can be complicated. As with any financial decision, it’s important to consult with a tax professional or financial advisor to determine the tax implications related to any life insurance policy you’re considering purchasing.

Since its inception, life insurance has been about relationships—protecting those you care about. You want to get life insurance to protect the ones you love. Life insurance enables you to do that. Underwriting ensures you receive the best life insurance rates possible from the best life insurance companies in the U.S.

What Is Underwriting?

The dictionary says that to underwrite something means to accept responsibility for guaranteed payment in case loss or damage occurs.

The business of underwriting is a vetting process. The insurance company wants to make sure you’re a good insurance risk. And they want to make sure you can afford the premium. It’s also your chance to choose the best company for your needs.

In relationship terms, underwriting ensures the relationship between you and your life insurance company is a strong one. You just have to find a company you can work with.

Every life insurance company has its own set of standards and guidelines as to what constitutes an acceptable risk and what they’re not willing to cover.

There are two types of underwriting: full and accelerated.

Full underwriting is the traditional kind. It includes a medical exam and lab tests. It takes between six and eight weeks.

Accelerated underwriting requires no medical exam or tests, so it takes less time. However, no-exam life insurance can be more expensive than fully underwritten policies. AI has made it easier to streamline the process through technology called insurtech, which uses algorithms and machine learning to go through data quicker.

How Underwriting Works

The Application

The underwriting process kicks in once you’ve submitted your application. That application asks about your height, weight, habits (smoking, drinking, exercising), hobbies, and questions about your current and past health as well as your family’s health history.

The Phone Interview

The phone company will set up a call to ensure the information you provided on the application is correct. It takes no more than 30 minutes.

The Medical Exam and Lab Tests

This is a free exam of your height, weight, BMI, blood pressure, and blood and urine tests.

If your tests reveal red flags, the insurance company may order an Attending Physician Statement (APS) to find out if there are any underlying conditions.

They will also conduct a prescription check of all medications prescribed to you in the past three to five years.

The Motor Vehicle Report

The insurance company will also look at your driving record. Tickets, accidents and DUIs can mean you’ll pay a higher premium. Some companies will deny a life policy based on a DUI.

The Actuarial Tables

This is where the underwriter takes the collected data and compares it to actuary tables to help get a sense of your life expectancy. The mortality table is a statistical baseline that uses your age and gender to predict when you’re most likely to die.

They may also use a build table, which uses your height and weight to further predict your life expectancy.

The older and heavier you are, the higher your premium will be.

The Risk Classifications

The insurance company uses classifications made up of people who share the same characteristics posing a specific level of risk. This is what will determine how much premium you will pay.

For instance, if you’re in excellent health, don’t smoke, work a desk job, have a clean driving record and have no risky hobbies, you’ll likely be classified in the Preferred Best, or Preferred Select group, which pays the lowest premiums.

Most people are placed in the Standard class, with characteristics being a bit overweight, having some medical issues and dings on their driving records, and engaging in a risky hobby or two once or twice a year.

To be in this group, you have to have been smoke-free for at least a year. People in this classification pay the baseline rate. If you smoke, you’ll be placed in a substandard class and pay a higher rate.

 

Once the company assigns your rating, they send you the contract for signature. If you’re not happy with the premium offered, you can negotiate or look for another company to work with. As stated earlier, every life insurance agency has different guidelines about what they are willing to risk and what they aren’t.

 

Your online life insurance quotes are the beginning. Underwriting allows you to find the best life insurance with the best company you can go the distance with.

Maybe you’ve never heard of Universal Life Insurance. Many people haven’t. For those who don’t want the restrictions that Whole Life policies demand but desire the benefits it’s known for, a Universal Life Insurance policy offers the flexibility and freedom other policies do not.

Understanding Universal Life Insurance

Like Whole Life, Universal Life provides lifetime coverage and cash value.

A Universal policy puts you in the driver’s seat as to how much and when you pay your premiums after your first payment. (Most companies do have a minimum requirement.)

It allows you to adjust your death benefit according to your shifting circumstances. For example, if your beneficiaries are less dependent on you for financial security, you can lower the death benefit—and thus your premium amount.

And like Whole Life insurance, Universal Life allows you to build cash value, which you can invest anywhere you wish. You can invest it in a wealth-building vehicle or use it to pay for your premiums, loosening your budget to spend your hard-earned money on other things.

However…

A Universal Life Insurance policy is vulnerable to market fluctuations. If interest rates don’t perform well, neither will your cash value. It could dwindle to zero or fall below your policy’s value. And if that happens, the insurance company will use your death benefit to pay the difference.

And if you miss a payment, which often happens as premium payment flexibility can lull you into a false sense of security, you will lose the policy and pay back any amount owed. Insurance companies depend on your premium payment to cover their costs of doing business. If those costs are higher than what you’ve paid in premiums or have in cash value, you’ll owe it back to your carrier.

But there is a way to protect yourself from this scenario.

No-Lapse Guaranteed Life Insurance Rider

You can purchase a no-lapse guaranteed rider on top of your Universal policy to protect it against unfortunate market dips and forgotten payments. This entails adding a minimum-amount premium with a set schedule onto the traditional Universal policy but it’ll keep you paid up even if you miss an unscheduled premium.

A No Lapse Guaranteed Universal Life Insurance Policy ensures your policy won’t lapse.

Riskier Universal Life Insurance Policies

Those with a higher tolerance for market fluctuations may consider Indexed Universal Life or Variable Universal Life, both of which build cash value quicker. They do need babysitting though as they are vulnerable to changes in the market and lapse-causing forgotten premium payments.

Universal Life Insurance: Pros and Cons

Armed with the basic facts, let’s examine the pros and cons Universal Life Insurance pose to someone considering buying Universal Life Insurance as opposed to Term Life or Whole Life.

Pros

• has the same benefits as Whole Life Insurance: lifetime coverage and cash value

• is less expensive than Whole Life

• offers more flexibility in how much and when you pay your premium

• gives you more control over where you’ll invest the cash value your policy provides

Cons

• is less expensive than Whole Life, but more expensive than other types of life insurance—especially if you opt for a No Lapse Guaranteed rider

• needs babysitting. If you aren’t monitoring your premium payments and investments, you could lose your coverage and owe the insurance company money.

As I said at the beginning of the article, while it’s called “universal,” Universal Life Insurance isn’t for everyone. But if you want the benefits but can’t afford Whole Life and have a risk-taker mindset, this type of policy warrants some consideration.

Right now, just paying bills and providing for your family are top of mind for everyone. Which is as it should be.

The question is, how will the bills be paid and your family’s current lifestyle remain uninterrupted should you no longer be there to provide for them?

Unthinkable scenarios aside, life insurance is a spectacular investment vehicle for long-term wealth building.

But who has the time to conduct a life insurance rates comparison on the best types of life insurance out there with everything else on your to do list?

Life Insurance Quotes, Free & Simple

When online buying disrupted every other industry, life insurance saw the opportunity to not only make purchasing easier but to eliminate what buyers disliked most. High-pressure sales.

Gone are the days of going into an insurance office to haggle with a high-pressure salesman showing you insurance policies you don’t need and can’t afford. We don’t like that any more than you do.

You can instantly access several life insurance companies and their costs from your computer in one place at one time. Your options appear side-by-side so you can easily compare the quotes and features of each carrier.

For free.

It’s only after you’ve looked at the best life insurance options for you and your family that you are offered the opportunity to speak with a non-commissioned agent trusted to act only as an advisor—not a salesperson.

Armed with facts, you drive the conversation. And if you don’t want to speak to an agent, you can bypass that step and buy an online life insurance policy on your own.

Building Wealth Through Life Insurance

Start with Term Life Insurance.

Right now, your budget may be pulled in all directions with day-to-day living expenses as you grow your career and raise your family. Most people are.

Get term life insurance and make a start toward long-term wealth with an affordable term life insurance quote. A small investment of $25 a month for a 30-year term life insurance policy can yield wealth-building dividends later.

Transition to Wealth-Building Whole Life.

Whole life insurance builds wealth for your family with less risk, interest-bearing dividends you can use to invest in your retirement, your children’s education, or real estate. It’s yours to spend however you wish. And it provides lifetime coverage.

But the term policy you buy today can be converted into an investment vehicle down the road. The conversion will require no medical exam or health questions. Just a seamless transition from one policy to another.

Life insurance is so much more than a policy. It’s an investment in your future. And it starts with a tap or two on a keyboard for online term insurance. For free.

Hassle free.