What is considered a substandard risk?

Being table rated means you will pay an extra percentage on top of the standard premium. The percentage amount you pay is determined by what table rating you receive from the insurance company.

Table ratings run alphabetically or numerically, depending on the insurance company. Each table rating is an extra 25% on top of the Standard price. Typical table ratings start at Table A, or Table 1, and can run all the way to Table P, or Table 16.

The table below shows an example of how the annual premium of a life insurance policy would be affected by a table rating if the policy being applied for cost $500 for someone with a Standard risk class.

Not all life insurance companies underwrite risk factors in the same way. For example, while one company may want to give a diabetic applicant Table 6 another company would be comfortable with Table 2.

This is one reason why applying for life insurance through Quotacy is beneficial to you. Quotacy is an independent life insurance broker and can shop your case around to multiple top-rated life insurance companies to help you get the best price possible for your particular situation.

Life Insurance Substandard Risk Class: Flat Extra

Another way life insurance companies balance out taking on extra risk for a substandard applicant is adding a flat extra to your premium. A flat extra is an extra payment added on top of the premiums to cushion an insurance company’s risk. Flat extras are usually given instead of a table rating if the risk factor is constant, such as deafness, or if the risk factor is decreasing, such as the aftermath of surgery.

The flat extra is a specific added dollar amount per $1000 of insurance coverage. These flat extras can be permanent or temporary. It’s even possible that you’re in perfect health and still get assigned a flat extra.

As an example, a mountain climbing instructor may be in great shape with no adverse health history and qualify for a Preferred Plus rating, but because of the hazardous career choice, the insurance company may tack on a permanent flat extra.

Example:

Eddie Johnson is 35 and applying for a 30-year $500,000 term life insurance policy. He’s in great health and works as a SCUBA diving instructor. The insurance company approves his policy at Preferred Plus but requires him to pay a permanent $3 flat extra.

If Eddie had a low-risk job, his 30-year $500,000 term policy would only cost him about $450 annually. But because of his risky job, the $3 flat extra means he pays an extra $1500 (3×500) on top of the $450. Meaning his annual cost is $1950, or roughly $163 per month. 

If you receive a permanent flat extra, buy the life insurance policy, but then later on in your life the risk factor is no longer present, you can ask the insurance company for a reconsideration.

Let’s use Eddie as our example again.

Eddie quits SCUBA diving ten years into his term policy and takes over the sales department of a SCUBA store instead. Now that Eddie has a low-risk job, he can ask the insurance company for a reconsideration.

The insurance company will evaluate his situation and if they deem him no longer high risk with no other new health underwriting issues, they will remove the flat extra and Eddie would then only pay $450 annually for the remainder of his policy’s term, which would be 20 years.

I mentioned that a flat extra can be permanent or temporary. Eddie’s was permanent because the insurance company couldn’t assume he’d ever quit his job as a SCUBA instructor. A temporary flat extra may be given in a situation that there is a risk currently, but it’s likely to decrease over the years.

For example, a cancer survivor may be given a temporary flat extra for a few years to provide the insurance company extra cushion in case of remission. Or someone with a criminal history may be given a temporary flat extra until a certain number of years have passed since completion of parole.

As with table ratings, flat extra assignments can vary by insurance company as well. Your Quotacy agent will double-check that the life insurance offer you receive is the best option you have.

However, even after your Quotacy agent shops your case, there’s a chance they may not be able to find a better risk class offering. While you are not obligated to accept the company’s offer, we highly recommend that you do.

If you’re given a substandard rating because of your health and you decline the policy, your health could get worse and you may end up becoming uninsurable. But if you accept the policy and your health gets better, you can always reapply at a different time to see if you can get approved at better pricing. At least you’ll have financial protection for your family in the meantime. And if your health does get worse, you’ll be glad you purchased the policy when you did.

Apply for life insurance through Quotacy. Our agents work only on your behalf. No need to even give us your contact information until you’re ready to apply. Run a quote today to get started.

There are several methods used in assessing premium rates for substandard risks. If an applicant poses a substandard risk, there are ways for the insurer to lessen its own loss exposure.

Extra Percentage Tables

The use of extra percentage tables is the most commonly used method. This method relies on a numerical system devised to calculate premium rates for those who present a higher health risk for the insurer. A number of premium rates are established for varying ages and policy types based on the number of deaths per thousand that will increase with age for varying cases. The additional rate may be 125% to 500% of the standard premium rate. This rating system is usually utilized in health issues.

Permanent Flat Extra Premiums

The rating system known as the permanent flat extra premiums system charges a fixed amount per $1,000 of insurance over and above the standard premium charge. If the insured's health condition improves significantly over time, the extra charge may be removed.

Temporary Flat Extra Premiums

Temporary flat extra premiums are akin to the permanent flat extra premiums rating system described previously except that the extra charge is only for a designated period of years. This type of rating allows for risk that is higher in the beginning of the policy period and lessens with time; for instance, surgery. Risk may be higher right after the surgery but prognosis becomes better as time passes.

Rating-Up In Age

Rating-up in age is no longer used predominantly, but the Florida manual mentions it. This method assumes the insured is older than stated and therefore charges the higher rate that would normally be charged using the actual age. As stated before, this method can be used in field underwriting.

Lien System

The lien system allows the insurer to place a lien on the policy and is used mostly when the insured has extensive or severe health problems. If the insured dies prematurely, the death benefits are decreased by the lien which is held in conjunction to the relationship between premiums paid and the policy's stated death benefit. For instance, if the insured dies during the policy's first year, only the premiums paid for that year would be repaid and the insurer would retain the full death benefit.

The Florida study manual states that this system is only used now with some money-purchase pension plans where premiums are uniform and pointedly names the drawback that the insured might not understand that they are actually getting less than the face value they are paying for.

• Substandard, Doubtful," "Loss" or words of similar import, and CNYF and its Subsidiaries shall promptly after the end of any month inform Niagara Bancorp of any such classification arrived at any time after the date hereof. The other real estate owned ("OREO") included in any non-performing assets of CNYF or any of its Subsidiaries is carried net of reserves at the lower of cost or fair value, less estimated selling costs, based on current independent appraisals or evaluations or current management appraisals or evaluations; provided, however, that "current" shall mean within the past 12 months.

• Sustainability Risk means an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment;

• Low risk means a category of patient at low risk of opioid induced morbidity or mortality, based on factors and combinations of factors such as medical and behavioral comorbidities, polypharmacy, and dose of opioids of less than 50 MED.

• Minimal risk means that the probability and magnitude of harm or discomfort anticipated in the research are not greater in and of themselves than those ordinarily encountered in daily life or during the performance of routine physical or psychological examinations or tests.

• All Risk property insurance on a full replacement cost basis insuring CLEC’s property situated on or within the Property, naming Embarq as loss payee. CLEC may elect to insure business interruption and contingent business interruption, as it is agreed that Embarq has no liability for loss of profit or revenues should an interruption of service occur.

• systemic risk means a risk of disruption in the financial system with the potential to have serious negative consequences for the financial system and the real economy;

• operational risk means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk;

• Potential geologic hazard area means an area that:

• Insured Risks means fire lightning explosion earthquake storm tempest flood subsidence landslip heave impact terrorism bursting or overflowing of water tanks and pipes earthquake damage by aircraft and other aerial devices or articles dropped there from riot and civil commotion labour disturbance and malicious damage and such other risks as the Academy Trust insures against from time to time subject in all cases to any exclusions or limitations as may from time to time be imposed by the insurers or underwriters;

• Geologically hazardous areas means areas that because of their susceptibility to erosion, sliding, earthquake, or other geological events, are not suited to the siting of commercial, residential, or industrial development consistent with public health or safety concerns.

• high risk breach means that the threshold for notifying the individual is higher than that for notifying the relevant supervisory authority.

• Potentially hazardous food means any food that consists in whole or in part of milk or milk products, eggs, meat, poultry, fish, shellfish, edible crustacean, or other ingredients, including synthetic ingredients, in a form capable of supporting rapid and progressive growth of infectious or toxigenic microorganisms.

• Special form radioactive material means radioactive material that satisfies the following conditions:

• fall risk means any potential exposure to falling either from, off or into;

• Indicator means a quantitative or qualitative factor or variable that contributes to better understanding progress in implementing;

• Degradation means a decrease in the useful life of the right-of-way caused by excavation in or disturbance of the right-of-way, resulting in the need to reconstruct such right-of-way earlier than would be required if the excavation or disturbance did not occur.

• Airborne radioactivity area means a room, enclosure, or area in which airborne radioactive materials, composed wholly or partly of licensed radioactive material, exist in concentrations:

• Replacement Cost means the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws, and without deduction for depreciation.

• Airborne radioactive material means any radioactive material dispersed in the air in the form of dusts, fumes, particulates, mists, vapors, or gases.

• Disease means an alteration in the state of the body or of some of its organs, interrupting or disturbing the performance of the functions, and causing or threatening pain and weakness or physical or mental disorder and certified by a Medical Practitioner.

• At risk means there is reason to believe injury, hazard, damage, or loss may occur.

• Leakage means an increase in greenhouse gas emissions

• Country Risk means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.

• Special Mention Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Watch list" or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder, (4) where a reasonable doubt exists as to the timely future collectibility of principal and/or interest, whether or not interest is still accruing or the loans are less than 90 days past due, (5) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower's ability to pay in accordance with such initial terms, or (6) where a specific reserve allocation exists in connection therewith, and (G) all assets classified by Innes Street or Citizens Bank as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure.

• Compression Ignition Engine means an internal combustion engine with operating characteristics significantly similar to the theoretical diesel combustion cycle. The regulation of power by controlling fuel supply in lieu of a throttle is indicative of a compression ignition engine.

• Tail risk means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.

Substandard Risk Application Notice shall be clear and conspicuous on the face of the Substandard Risk Application.","The Company uses a nine point rating system as follows: Risk – 1: Excellent Risk – 5: Acceptable Risk – 9: Loss Risk – 2: Minimal Risk – 6: Special Mention Risk – 3: Above Average Risk – 7: Substandard Risk – 4: Average Risk – 8: Doubtful The following is a summary of the definitions for the risk ratings: Pass – A pass loan includes all loans risk rated 1 through 5 as indicated above.","Substandard Risk Rate" means a rate or premium charge that reflects the greater than normal exposure to loss which is assumed by an insurer writing insurance for a substandard risk.","Should the Superintendent cease employment with the District with a negative vacation balance due to having used vacation in advance of its accrual (which may be done with written approval of the Board), it shall be deducted from any salary owed at the then-current per diem rate during the Superintendent’s last months of employment or, at the District’s election, be repaid by the Superintendent following termination of employment.","The Substandard Risk Insurance Policy Notice may not be printed on a separate sheet of paper, on a sticker attached to the Policy, or on an overlay sheet.","The Substandard Risk Application Notice may not be printed on a separate sheet of paper, on a sticker attached to the Application, or on an overlay sheet.","The Substandard Risk Insurance Policy Notice shall be clear and conspicuous on the face of the Substandard Risk Policy."],"id":"substandard-risk","title":"Substandard Risk"},"groups":[{"snippet":"means an applicant for insurance who presents a greater exposure to loss than that contemplated by commonly used rate classifications, as evidenced by one or more of the following conditions: (A) A record of traffic accidents; (B) A record of traffic law violations; (C) Undesirable occupational circumstances; or (D) Any other valid underwriting consideration.","samples":[{"uri":"https://www.wvinsurance.gov/Portals/0/pdf/pol_leg/rules/ins/rule_037.pdf","label":"Notice","score":10}],"snippetLinks":[{"key":"an-applicant","type":"clause","offset":[6,18]},{"key":"insurance","type":"clause","offset":[23,32]},{"key":"greater","type":"clause","offset":[48,55]},{"key":"exposure","type":"clause","offset":[56,64]},{"key":"loss","type":"clause","offset":[68,72]},{"key":"contemplated","type":"clause","offset":[83,95]},{"key":"rate","type":"clause","offset":[113,117]},{"key":"classifications","type":"clause","offset":[118,133]},{"key":"following","type":"clause","offset":[170,179]},{"key":"conditions","type":"clause","offset":[180,190]},{"key":"record-of","type":"clause","offset":[198,207]},{"key":"accidents","type":"clause","offset":[216,225]},{"key":"traffic-law","type":"definition","offset":[243,254]},{"key":"violations","type":"clause","offset":[255,265]},{"key":"occupational","type":"clause","offset":[283,295]},{"key":"circumstances","type":"clause","offset":[296,309]},{"key":"valid","type":"clause","offset":[328,333]},{"key":"underwriting","type":"clause","offset":[334,346]},{"key":"consideration","type":"clause","offset":[347,360]}],"size":1,"hash":"c54054981ff27143925d51158b50ec57","id":1}],"nextCurs":""}} id=pagination-first-page>