ARLINGTON, Va., Sept. 24 VA-Cartoon-INS-Survey
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:
- 30% chose George Jetson, a healthy dad living a life of modern conveniences. "A nonsmoker in great health, George is the ideal candidate for a preferred rate on life insurance. His job isn't overly taxing, he has no discernible bad habits and modern amenities such as his robot housekeeper, Rosie, help keep his life manageable and in control."
- 22% said Popeye, a perpetual smoker and brawling sailor man. "The fact that Popeye eats lots of spinach and exhibits uncommon physical strength are big pluses from an underwriting standpoint. However, Popeye's ever-present corncob pipe would drive up the cost of his coverage by an estimated 100-150%. The fact that so much of his time is spent fighting the likes of Bluto and other unsavory characters might lead to further increases in his rate."
- 18% chose Batman, a vigilante constantly putting his life in danger. "Even though wealthy industrialist Bruce Wayne is the picture of good health, if he were honest about what he does in his spare time it's likely he would be declined coverage altogether. Continually choosing to put himself in extremely dangerous situations, Batman would not be considered a good risk by many insurance companies."
- 17% chose Fred Flintstone, a middle-aged, overweight father. "Fred needs to cut back on those gigantic dinosaur ribs and brontosaurus burgers he loves to order at the drive-in because his weight is the biggest underwriting challenge he faces. Some might think that his job as a bronto crane operator at the local quarry might be an underwriting concern, but very few jobs affect the cost of life insurance."
- 13% said Elmer Fudd, a gun-toting senior citizen, tormented by a clever talking rabbit. "The older you are, the more you'll pay for life insurance. So Elmer Fudd's age would be a major determinant in how much he'd pay for life insurance. Elmer is an avid hunter and lifestyle issues can affect the cost of coverage. The good news for Elmer is that hunting generally won't negatively impact your life insurance rates."
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:
- Don't smoke - On average, smokers pay 100-150% more for life insurance coverage than nonsmokers. Smoking also tends to constrict artery walls and elevate blood pressure, so if you are a smoker, it's important not to smoke 30 minutes prior to a life insurance health exam.
- Know your medications - Know the prescription medications you may be taking so that you can cross-check them with the results of any blood tests required by the insurance company. This will help ensure you receive an accurate reading.
- Review your policy if your health has improved - If you've lost weight or made significant improvements to your health since purchasing life insurance, talk with your insurance agent - you may be able to qualify for a lower life insurance rate.
- Refrain from dangerous hobbies - People with dangerous avocations, such as skydiving or scuba diving at deep depths, will most likely pay a higher price for life insurance because they choose to put themselves in high-risk situations.
- Keep that driving record clean - While driving records are not always examined when applying for life insurance, an extensive rap sheet of speeding tickets, car accidents or DUIs will certainly be a red flag.
For a copy of the free underwriting report, visit
www.lifehappens.org/costofcoverage .
Survey Methodology
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 of error of +/- 3.1 percent.
About Life Insurance Awareness Month
Life Insurance Awareness Month was created by the LIFE Foundation in response to growing concern about the large number of Americans who lack adequate life insurance protection. According to LIMRA, 68 million adult Americans have no life insurance. Those who own life insurance have an average of four times their annual income in coverage, which is considerably less than most experts recommend. Held each September, Life Insurance Awareness Month is an industry-wide effort involving hundreds of leading companies and tens of thousands of agents. More information about the campaign can be found at
www.lifehappens.org/liam .
About LIFE
The Life and Health Insurance Foundation for Education (LIFE) was founded in 1994 in response to the public's growing need for information and education on life, health, disability and long-term care insurance. LIFE also seeks to remind people of the important role insurance professionals perform in helping families, businesses and individuals find the insurance products that best fit their needs. To learn more about these topics, please visit
www.lifehappens.org.
CONTACT: Brooke Parker
212-445-8142
-or-
Katharine Carver
212-445-8210
SOURCE LIFE Foundation
