Understanding Term Life Insurance Policy Ratings

Generally, Term life insurance policies in Canada wil receive one of four underwriting decisions:

1. Preferred Rates – Preferred rates are given to individuals who are in excellent health and have very good family health history. Preferred rates are often broken down into ‘Preferred’ and ‘Super Preferred’ categories. ‘Super Preferred’ are given to the healthiest individuals with the best family health history and can result in a savings of up to 30%.

2. Standard Rates – Most life insurance applications receive standard rates. Standard rates are given to individuals who are in good health. Family health history typically does not factor in to receiving a standard classification.

3. Substandard Rates – Substandard rates or policy ratings are given to individuals who have health or lifestyle issues that cause them to be at an increased risk to the insurance company. Health issues such as angina and diabetes, or lifestyle issues such as past alcohol and drug abuse can result in policy ratings of anywhere from 50% to 300% on top of standard rates. If the insured receives a policy rating of 100%, they would pay double the normal standard rate.

4. Declines – Individuals who are in very poor health or have severe lifestyle issues may find their policy application gets declined. If the insurer’s application is declined, they can try a simplified issue or guaranteed issue policy. These policies often have a two-year waiting period on the death benefit, which means if the insured passes away in the first two policy years, the beneficiary will receive a return-of-premium plus interest.

For more details on term life insurance in Canada, please visit our Term Life Insurance Instant Quote Page or visit our Non-medical Life Insurance Quote Page.