How a traffic ticket or five extra pounds can raise your insurance rates

July 15, 2011

The following is a guest post by Jennifer Merritt. The opinions expressed are her own.

When 49-year-old Femi Obikunle began shopping for life insurance three months ago, the price seemed right. For under $900 per year, the generally healthy father of four was told he could likely get a $500,000 term policy. Then came the physical and blood tests. The new rate he was quoted: more than $4,000 per year.

You’d think that the routine screenings had found something seriously wrong with Obikunle, say abnormally high blood pressure or cholesterol, or a life-shortening disease.

But there wasn’t anything terribly wrong with Obikunle — at least not a condition any doctor would treat him for. Instead, the rate he was quoted more than quadrupled because his blood sugar levels indicated he could be pre-diabetic. His doctor disagreed and Obikunle says he probably just drank a few too many sugary drinks in the days leading up to the tests.

“It’s outrageous,” the Columbus, Ohio resident says. “Even though the doctor will say your range is alright, the requirements insurers want are much too stringent.”

Most people know smoking, obesity and high blood pressure can mean paying more for life insurance, but increasingly, other factors have been keeping even those in good health from scoring the best-available rates. On paper these days, a 40-year-old man in very good health and no real risk factors could buy a $500,000, 20-year term policy for as little as $360. But few people actually pay that little.

Life insurers generally tier their rates and the price goes up exponentially, between 25 percent and 50 percent each time you fall from a high tier to a lower one. Preferred plus, the lowest rate available, is reserved for those who are in excellent health and who have no risk factors, says Byron Udell, CEO and Founder of life insurance comparison and quote website Add a risk factor — or two or three — and you’ll be bumped to a lower tier and pay more. And some insurers add surcharges for undesirable behaviors, illnesses or hobbies.

“The world of underwriting is not just height, weight, blood pressure and a good note from your doctor,” says David Solie, president of RiskTutor Inc., a Calabassas, California underwriting and risk management coaching firm.

It can be hard to figure out exactly which little things insurers consider big things. But just one could boost your yearly premium on a 20-year term policy by $100. Have two risk factors and your policy could cost $300 to $600 more, not including any surcharges, Udell says. Over 20 years, that’s an extra $12,000.

Little things that mean big rates:

Sickness you don’t even have — yet
As Obikunle discovered, early warning tests are increasingly popular tools for insurance underwriters. Test pre-diabetic or pre-hypertensive by insurer standards — not by doctors, whose clinical standards allow more wiggle room — and you’ll be pushed to a higher rate tier. In some cases, like Obikunle’s, you’ll also pay a surcharge. “The industry is looking for an economical way to screen risk and this early recognition technology is a way for them to do this,” says Solie. There are early recognition tests for markers of heart disease, diabetes, hypertension and more.

Traffic tickets
If you got caught speeding, running a stop sign or talking on your cell phone while driving, insurance underwriters assume you’ve probably done it hundreds of times before without being caught. Risky driving behavior, even the mild kind, raises a red flag — and premiums. Ohio National, American General and several other large insurers will knock you down one tier or more if you have more than one moving violation in the prior three years, says AccuQuote’s Udell.

Others set the bar at more than two tickets. Expect to pay $100 to $300 more per month if you’re a lead foot. If you’re over 50, you’ll pay a higher rate and might also face a surcharge. The best-rate premium for a 50-year-old non-smoker with two tickets in 36 months: $1,000, says Udell.

Those five extra pounds
Some insurers don’t charge higher rates unless a customer is 20 to 30 pounds overweight. But several start upcharging at a measly five or 10 pounds. That means a 6-foot male who weighs 220 pounds could pay up to $300 extra per year. Udell says it usually doesn’t matter if the extra weight is muscle. If you fall outside the standard weight chart limits and are in great shape, it can’t hurt to take a photo of yourself in workout attire — or shirtless if you are male — to show that you might be over the limit, but aren’t overweight, Udell suggest.

Getting treatment — even if it makes you healthier
If you take medications to treat high cholesterol, some carriers will penalize you even if the medication works, because the treatment comes with its own risks. Blood pressure medications almost always push you into a more expensive price tier. It’s the same story for anti-depressants, even if you no longer take them. “It would seem that the person who gets treated is a better risk,” says Solie. “But that’s not how the industry has looked at it.”

Most life insurance applicants sign a form that allows insurers to access prescription data provided by pharmacy benefit providers (like Caremark or Medco). That report will show all the prescriptions you’ve had filled in the last three to five years, coded based on its red-flag raising level, says Solie. To avoid the price penalty, Solie recommends asking your doctor to vouch for your recovery, especially if your treatment lasted less than a year and was related to an isolated event.

Family history — even if Dad ate bacon and smoked and you don’t
Your father had a heart attack at age 55. But he smoked, ate poorly and rarely visited a doctor. You, on the other hand, have never touched a cigarette, don’t eat fatty foods and go for a check-up twice a year. Unfortunately, few insurers will care. “A parent with heart disease will rule you out of preferred plus and knock you into the second or third tier,” no matter how healthy you are, Udell says.

Occasional hobbies
Like to scuba dive below 60 feet, but just on vacation? Have a private pilot’s license and fly just for fun, but fewer than 50 hours a year? You will pay more — and maybe a lot more. If you piloted a small aircraft between 50 and 200 hours a year or scuba-dived regularly (and in countries with enforced safety standards), you’d actually be a better risk, says Udell. But occasional hobbyists are considered less experienced and, therefore, more of a risk. Expect to be knocked down at least tier and to possibly pay a risk surcharge.

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Nowadays, everybody has at least an insurance, whether it’s a life insurance, or you just have your car insured. I knew that your rates can go up if you receive a traffic ticket, but the other reasons you’ve mentioned here, that can generate increase in rates are very new to me. Still, it’s good to know this kind of information, to be informed.

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