What are the designations of "preferred", and what do they mean?

What are the designations of "preferred", and what do they mean?

Elliot Matloff (President and Broker, The Matloff Company) gives expert video advice on: What kinds of questions should I ask when evaluating life insurance options?; How does smoking affect life insurance rates?; How does my weight affect life insurance rates? and more...

Insurance companies look at all people for life insurance to see if you are super-preferred. That's a person that has no medical history, has probably taken no medications, is normal height and weight, has everything going for them health-wise, and maybe exercises on a regular basis. With this person, when the lab results come back everything is really good, they take regular physical exams, everything looks really terrific, and their parental history or their sibling history is good. For example, if a parent died prior to age sixty from heart disease or cancer, they usually ding the premium, so to speak. However, if a person has healthy parents and they lived a long life or died at age eighty-nine or ninety, the insurance companies like that type of scenario, and they issue what's called a super-preferred rate. That's the best rate you can get. If they find that you're perfect but you might be taking cholesterol medication or you're a little bit chunky and you haven't lost all those extra pounds that you should, they'll probably issue you a preferred rate. Then, if you're just an average person; you're not a preferred, they might give you what they call a standard rate. Then, you have the problem cases. That's when you have serious problems and what they usually give you is what's called a table rating; they rate you Table A, B, C, all the way to Table H. Sometimes, some companies call them Table 1 through 16, and the premiums can be really, really high if you have serious problems. Many, many years ago I sold a four hundred pound client an insurance policy and he was only six feet tall. Now, obviously that wasn't a very healthy person but he was issued and he paid an exorbitant premium. He luckily lost weight, but unfortunately gained it back and passed away, and the insurance companies still lost money because he died way before they thought he was going to die. They look at these health conditions and then they just determine whether they're going to give the person a rating or not. The insurance broker is trying to get the best rate for the client, because otherwise the client will go to some other insurance broker who they think will get them a better rate.