LIFE Foundation Releases 'Caricature of Coverage' Survey to Help Consumers Better Understand the Factors that Determine Life Insurance Rates
ARLINGTON, Va., Sept. 24 /PRNewswire/ -- To qualify for a favorable rate on life insurance, it helps to be in great physical shape. Why, then, would Batman have a harder time getting a better rate on life insurance than George Jetson and Popeye, and even lesser physical specimens like Fred Flintstone and Elmer Fudd? According to a survey and analysis by the nonprofit LIFE Foundation, the answer lies in the fact that good physical conditioning is just one of many factors that determines how much a person will pay for life insurance coverage.
"Understanding the various factors that affect the cost of life insurance coverage is important because it helps people avoid surprises in the buying process," says LIFE Foundation spokesperson Jack Dewald, CLU, RHU. "Only about 30 percent of Americans will qualify for the best rates on life insurance, and our survey indicates that there's definitely some confusion about how risk factors impact the cost and availability of coverage. The good news is that there are things people can do to help them qualify for better rates."
Survey Findings - A Caricature of Coverage
Life insurance underwriting is the process that insurance companies use to determine how much a particular person will pay for life insurance coverage based on a variety of risk factors such as age, medical history and lifestyles choices. To help Americans better understand this important concept, LIFE asked survey respondents to consider five fictional characters and select the one they believe would qualify for the most favorable life insurance rate. Here's how the public weighed in, along with commentary from Dewald, an underwriting expert:
Consumer Understanding of Underwriting Basics
Consumers got a passing grade when assessing the risk factors of fictional characters, but they did not fare as well on other survey questions. Almost half (45%) think where a person lives can impact the rate they pay, and nearly a quarter (23%) think race is a factor. In reality, neither is considered during the life insurance underwriting process.
More than one third (35%) do not realize physical fitness plays a role in the cost of coverage. Likewise, 1 in 5 (20%) does not think age is a consideration.
Also, consumers greatly underestimate the degree to which certain factors can impact life insurance rates. When asked how much more a cigarette smoker would pay for coverage versus a non-cigarette smoker, only 1 in 10 (10%) correctly says that it raises the cost by 100-150%. The vast majority (80%) say that smoking rates are only 5%, 25% or 50% higher, and 1 in 10 (11%) mistakenly believes that insurance companies are not allowed to charge cigarette smokers higher premiums.
What Consumers Need to Know
A new underwriting report released today by the LIFE Foundation provides an overview of what consumers need to know about the life insurance underwriting process and the main factors that impact how much they pay for life insurance. LIFE offers five tips for how consumers can keep some of the factors in check to help ensure they qualify for the best rate possible:
For a copy of the free underwriting report, visit www.lifehappens.org/costofcoverage .
The LIFE Survey was conducted in support of Life Insurance Awareness Month by Kelton Research between August 12-18, 2008. The survey polled 1,007 nationally representative Americans, ages 18 and older, using an online questionnaire. The survey has a margin o