Preferred or Standard Ratings: Which One is Better

Preferred and standard ratings are used by life insurance companies to determine how much to charge for premiums. But most people who apply for life insurance have no idea what these ratings are. To help you know more about them, we have listed out their pros and cons.

Preferred ratings

This rating is for people who have exceptional health and little or no health issues.

Pros

  • It has the lowest premiums

Of all the major ratings used by life insurance companies, preferred rating has the lowest amount of premiums you can pay. The reason is that the life insurance company sees you as a low risk individual who won’t cost them much money in the future.

  • It is for individuals with excellent health

Preferred ratings are mostly for persons with superb health. So, if your body mass index is normal and you have a clean medical history, you are sure to qualify for preferred ratings.

Cons

  • It is affected by your driving records

If you have had any major traffic violations within the last five years, you cannot qualify for this rating. Also, if you have had more than two moving violations or accidents or maybe had your driving license suspended within the last three years, you will be disqualified from this category.

  • It checks your family medical history

Your family medical history could affect your qualification for this category. If the life insurance company discovers that your parents or a sibling died from cancer or heart disease before age 60, that information is enough to disqualify you from this category.

Standard ratings

This is the rating for individuals with good health and normal life expectancy. These persons could also have minor health issues.

Pros

  • It accepts people with average health

If you do not make the cut off for preferred ratings, the next best category is the standard category. Unlike preferred ratings, standard ratings are not affected by your personal or family medical history.

Cons

  • It disqualifies some health conditions

Even though standard ratings are for individuals with good health, it still discriminates against some medical conditions. So, if you have got health issues like diabetes or hypertension, most life insurance companies will not allow you qualify for standard ratings.

  • It attracts an extra charge

Some life insurance companies could attach an extra charge to your premium rates. For example, a person with cancer who qualifies for standard ratings could be given an extra charge of $10 per every $2,000 of coverage for 7 years. Now, if that person has a $100,000 life insurance policy, that extra charge could add up to $500 a year. And this charge is in addition to your normal premium rate.