Quoting Conundrum: When Your Life Insurance Premium is Higher than Quoted

Those sneaky insurance agents!

"I spoke to an agent who quoted me a price for life insurance. I filled out the forms, I let a stranger come to my house to take my most prized possessions - my blood and urine- I waited and waited, and now...they want more money from me!"

This is a common conversation I have with people who are shopping for life insurance. They tell me that when they applied for coverage they were quoted one price and now the insurance company wants more money after doing a medical exam. In this blog post I’ll explore why this happens, tell you if its your fault, the agent’s fault or neither's fault, and what to do in these cases so that you can get the best rate on life insurance.

Why is My Life Insurance Rate Higher After the Exam?

Life insurance companies use health ratings to price your policy. The healthier you are, the less at risk you are of dying (young that is) and in turn Hands of two men counting, giving and taking dollars (Count money)you get a better price. You were quoted one health rating, and after the exam a lower rating was given by the underwriter (the person who is responsible with reviewing the exam results and doctor’s records). So why weren't you given an accurate quote to begin with? Whose fault is it, because I’d like to fire him! Woa - Not so fast - let’s explore who may be the responsible party here.

It’s all Your Fault!

If you are working with a competent insurance agent they should be able to quote you appropriately. When I give someone a quote for insurance, I usually give them a range of where I think pricing might come in after an exam, and typically I come pretty close to the right number. Your agent should be doing the same thing. If they are very confident you would get a certain price, I would see that as a lack of experience, because you never know what can be found on an exam. So if your agent knows what they are doing, why didn't they quote you properly?

It could be your fault. When it comes to life insurance the rule is disclose, disclose, disclose. Don’t leave anything out. It’s your agent’s responsibility to probe, but you should take ownership of disclosing as much as you can about your health, or any other fact that might impact your pricing (like if you ever filed bankruptcy, got a DUI, or spent last Christmas in the slammer). For example if your agent asked you if you smoked and you said no, you should disclose if you just quit 2 months ago, 2 years ago, or 5 years ago - all these factors can impact your rate.

You should disclose things like family history of heart disease, stroke, or cancer and if you have parents that died under the age of 70. If you smoke an occasional cigar - or smoke anything else for that matter - disclose it. While the onus is on the agent to ask, the more you disclose the more accurate a quote you should get.

It’s the Agent’s Fault!

If your agent is newly licensed and doesn't have much experience it may be the agent’s fault. Maybe they just wanted to get you to apply for a policy so they quoted you the best price, without taking your current health or situation into account, or maybe they simply don’t have the experience to quote properly based on asking you the right questions.

It’s Nobody’s Fault!

Sometimes you disclose everything you should and the agent asks all the right questions, but something comes up on the exam you’re not aware of. I've had the unfortunate experience of telling people who thought they were perfectly healthy that they have diabetes, high cholesterol, and even an enlarged prostate. These are things that come up that can affect your pricing that nobody could predict ahead of time.

What To Do When Your Term Life Insurance Quote is Higher than Expected?

When you find out that your rate is higher than originally quoted ask your agent for the reason why the rate is higher. In addition request a copy of the lab results from the medical exam that you had done. This information will enable you to know what to do next. For example if your rate is higher because your cholesterol is high, you will want to know exactly what the numbers were (which you should find out anyway for health reasons).

Your lab report should include total cholesterol, HDL, and LDL. Knowing these numbers and sharing them with an independent agent (like me) allows an agent to review the cholesterol guidelines of multiple carriers and see if you can get a better health rating, and in turn, better price with another carrier. It’s possible that the increase in rate will be across the board with all carriers, or that you can find an insurance company that will offer a better deal.

If you intend to stay with the same carrier you still have options to lower your cost. For example if you applied for a 30 year $500,000 policy, you can request the pricing on a 25 or 20 year policy and see if that more closely matches your intended budget. You can also lower the coverage amount and find a happy medium between price and coverage.

Independent vs. Captive Agent

Captive agents represent just one company - for example Allstate, or State Farm agents are considered captive. When you don’t get the intended results, the agent will only be able to try and convince you to stay with them, because they don’t have alternatives.

When you shop with an independent agent and don’t get the intended result with one company, your independent agent can simply go to another company that might offer you a better health rating. Going back to the cholesterol case, today I had a client that was approved at Standard Non Tobacco with Protective Life, based on total cholesterol of 298. Protective Life requires a 220 total cholesterol or less to qualify for their best pricing. ING on the other hand allows up to a total cholesterol of 300 for their best pricing as long as the HDL is less than 75 for men or 90 for women. In this case the client’s HDL (a female) was 91. My plan is to speak directly with ING and see if this client can get preferred plus or preferred pricing and get a better rate than with Protective.

The above example is the benefit of using an independent agent that is unbiased, versus an agent that works for just one insurance company.

If you've been quoted one rate and now have a higher offer, I can help you review your lab results as well as discuss your specific situation.