In this article I will try to answer one of the most common questions that baffle consumers who are considering purchasing a policy.

Why are my premiums higher than someone else I know?

There can be many reasons why premium rates vary from one person to the next. Age and policy design differences alone can have a big impact on the premium paid by two separate individuals.

But suppose two individuals were the same age and had an identical policy setup from the same long-term care insurer. What could most likely be the cause for a different premium rate for each policyholder?

In this care it is most likely that one received a more favorable rate classification than the other. When the underwriter reviews the results of the telephone interview and the medical records of an applicant, their decision is not simply approval or disapproval.

All long-term care companies have a rate classification system that is designed to assess the degree of risk that each applicant poses based on their health history. In many cases there are only two levels of risk, “preferred” and “standard”. However, other carriers may add two or three more levels of rate classification.

Preferred rates are usually reserved for those with an exceptional health history. This means that they would most likely be well within height/weight build guidelines, with no major illnesses in the past, and taking a minimum of prescribed medications, if any at all.

Standard rates are applied when there has been a history of potentially serious illnesses in the past such as heart attack, cancer, arthritis that requires medication, back problems that resulted in surgery, etc. Or the applicant’s height/weight ratio may also disqualify them for the best rate classification if it is too high.

Sub-standard rates may be applied to those who have had even more serious conditions or whose potentially disabling illness is considered more advanced. If the health problems are too serious the applicant is simply declined.

How do rate classifications affect my premium?

Those with a preferred rate classification get the best premium rates since they pose the lowest risk to the insurance carrier. Those with a standard rate classification often receive rates that are between ten and fifteen percent higher. Those who are considered sub-standard often see their premiums increase an additional twenty five percent.

It is very important to work with an agent who represents several major carriers as each company will have a unique underwriting procedure and the independent agent can help get you the best rates by comparison shopping.