What are Preferred Rates?
Preferred rates are the rates insurance companies charge people with lower risk factors (e.g., those who are in better health) than the average individual. You can compare them against standard rates, or the rates most people get charged for life insurance policies, which are higher than preferred rates.
Understanding life insurance ratings
Life insurance companies adjust the amount they charge to insure a specific person based on the risk that person poses. To keep things succinct, the sooner that person is to die, the riskier the insurer perceives them to be.
In order to evaluate an individual’s risk, insurance companies use a process called underwriting. It looks at the person’s health, their family health history, their occupation, their driving record, and more. Based on what they discover during underwriting, the life insurance company assigns the individual a rating.
While different insurance companies call them different things, the most common ratings are:
Preferred plus for the healthiest, lowest-risk people
Preferred for healthy people with one or two risk factors of note
Standard plus for people who are slightly healthier and lower-risk than the average individual
Standard for people in average health with average risk factors
Preferred tobacco for healthy people who use tobacco
Standard tobacco for people in average health who use tobacco
Preferred vs. standard and tobacco rates
To make it into the preferred category, an individual generally needs to be expected to outlive the average person. With that higher rating, they will usually pay much less for life insurance.People with a tobacco rating generally pay two or three times more for life insurance than people who don’t smoke, chew, or vape. You can usually take the standard rate and double it to arrive at a lowball estimated rate for a smoker.