Why Certain Personal Information Is Required for an Accurate Life Insurance Quote

December 5, 2017

Three out of five Americans own life insurance. This is according to a 2016 Insurance Barometer Study by research company LIMRA and nonprofit group Life Happens. The study further notes that consumers are receptive to buying life insurance and recommending one to people they know. The journey to a viable life insurance starts with getting a life insurance quote.

You’d then ask, “How do I get an accurate life insurance quote?” The answer is by disclosing certain personal information. Your height and weight, for instance, seem basic information but they make up your unique circumstances as an insured. This makes your quote more realistic, something that you can rely on to make an informed decision later on.

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Why You Need a Life Insurance Quote

To be fair, a life insurance quote is not a firm commitment from an insurer to give you a policy. Like loans, insurers have the discretion to decline or approve your insurance application.

They employ a thorough evaluation of your personal factors and circumstances in underwriting the policy that you’ve chosen based on:

  1. Your personal goals. Is it for financial support, long-term investment or retirement? What are your long-term financial goals?
  2. Your financial situation. How much are you earning? How much debt do you carry? Do you have savings and how much?
  3. Your beneficiaries. How old are your children or grandchildren? Will the insurance proceeds be enough to support them until they reach self-sufficiency if you were to outlive them?
  4. Your projected insurance costs. What is your expected death benefit? How long do you intend to pay your premiums? Moreover, how much can you set aside for your monthly insurance premiums?

It’s the financial protection and security that life insurance offers that makes it viable for consumers across all backgrounds, especially for breadwinners who have families to take care of.

Payout under life insurance depends on the kind of policy that one carries:

  • A permanent life-long coverage that pays out a one-time pre-determined benefit in the event of death. This is called whole life insurance policy.
  • A coverage that is in place for a limited period of time, thus the name term insurance. In case the insured dies within the term, the insurer will pay the face value of the policy. If the insured dies after the expiration of the term, there is no payout.
  • An investment that grows in value as it accrues interest over the life of the policy. This is the case of variable or flexible universal life – a combination of whole life and term insurance.

In seeking out the best policy for you, this is where life insurance quotes come in. [sc_content_link label=”The first step toward getting insurance quotes starts here.” cat=”life”]

Why Personal Information Is Needed for Your Life Insurance Quote

Life insurance policies are not one-size-fits-all. Everyone is different and as noted above, has different financial goals and preferred ways to achieve them.

The costs of insurance ultimately depend on your unique circumstances. Insurers rely on certain personal information to give you realistic pricing at the preliminary level. These include but are not limited to:

  • Complete name
  • Address
  • Contact numbers
  • Date of birth
  • Gender
  • Height
  • Weight
  • Coverage specifics: (i) amount, (ii) length of coverage, (iii) coverage period, (iv) premium payment.

Some insurers may further ask for existing health conditions for those high-risk insureds. That’s possible even for policies that don’t require medical examinations.

Rate Classes and Costs of Insurance

Life insurers price your premiums based on your risk class – a classification system where the applicant in excellent health gets the best rates.

To determine your risk class, insurers factor in health, medical records, income, lifestyle (drinking, smoking), and other variables according to their underwriting guidelines.

While these comprehensive details will likely be required after you submit your application, insurance carriers can still assign you to a risk class based on the information you’ve given for quote purposes:

  • Preferred Best/Super Preferred/Preferred Best: Applicants with excellent health, normal weight and health and no known health risk factors.
  • Preferred: Excellent health but with certain health issues. Other insurers break this down to Preferred No Nicotine and Preferred Nicotine.
  • Standard Plus: Optimum health but overweight, high blood pressure are an issue. Other insurers break them further down to Standard No Nicotine and Standard Nicotine.
  • Standard: Average health, normal life expectancy and minor health issues.
  • Table Ratings: Assessment of applicants based on their risk levels

Insurers can differ on the actual names and definitions of their risk classes. It’s possible to fall under neither of the classifications and still be eligible for coverage. Again, the insurance carrier can insure you or not.

Risk classification, as the American Academy of Actuaries said, is meant to group individual risks with similar expectations of loss and not “to reward or penalize groups of risks at the expense of others”.

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Personal Information and Life Insurance Quotes

The massive data breach at Equifax where the private information of 143 million Americans was hacked understandably makes anyone doubtful to share their personal information online.

Insurance companies and insurance brokers have their own internal controls and policies regarding sensitive data.

Some sites only ask for personal details when the customer expresses interest to apply for an insurance. Other sites will not divulge the personally identifiable information of the consumer, only the relevant medical conditions, to the insurance providers to provide quotes.

insurancespecialists.com, for instance, matches consumers who agree to provide their contact information with insurance carriers.

Aside from ensuring that your data is protected, keep these things in mind when you sign up for life insurance quotes:

  1. Your quoted rate could change when you submit your medical records.
  2. There are types of personal information that could affect your insurance rate, e.g. driving record.
  3. Your risk class could vary from insurer to insurer even when you share with them the same information. Thresh out these differences in costing and possibly discounts to find out which has the most viable offer.
  4. Quotes are just preliminary, the actual and final rate will depend on your insurer along with other costs. Your final rate could be higher than your quoted rate, it could also go lower than what you expected.

Treat quotes as a preview on the costs of your insurance policy. The closer they reflect your situation with the use of some of your personal information, the more accurate they become and the more reasonable you can set your expectations.

Speak with insurance specialists here.

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