Life insurance is a way of protecting your loved ones financially in case of your death. However, not everyone can get the same rates and coverage options when applying for life insurance.
Some people may have to pay more or accept fewer benefits due to their higher risk factors. One of the ways that life insurance companies charge more for high-risk applicants is by adding a flat extra premium to their policy.
In this article, we will explain what a flat extra premium is, how it works, what factors may lead to it, and how you can approach it.
Understanding Flat Extra Premiums in Life Insurance
What is a Flat Extra Premium?
Flat extra premiums, also known as flat extra charges, are applied to life insurance premiums to limit risk for insureds with inadequate ratings. If you’re high-risk, you may pay more.
How Flat Extra Premiums Work?
Flat extra premiums are normally $5 per $1,000 of coverage. With a $500,000 insurance and a $5 per $1,000 flat excess premium, you’d pay $2,500 yearly to cover the extra amount.
Some one- to five-year flat extra premiums exist. Others last the policy’s lifetime. The severity and kind of risk determine flat additional premium duration and amount.
Life Insurance Ratings and Associated Costs
When you apply for life insurance, the firm underwrites. Medical checks and mortality tables let them assess your risk before insuring you. They rate you based on what they discover.
Healthy people with safe jobs and activities get preferred plus or preferred ratings. Most persons get a standard grade, indicating average risk and life expectancy.
Insurers must choose if you fall below standard. They may refuse coverage or provide graded insurance. If they choose the latter, your coverage will cost more than average due to your increased risk.
A flat premium may be added to your insurance if the insurer considers you high-risk.
Factors that May Lead to Flat Extra Premiums
There are many factors that can increase your risk level and result in a flat extra premium. Some of the most common ones are:
Medical Conditions
Some medical conditions that can lead to a flat extra premium are:
- Cancer: If you have had cancer in the past or are currently undergoing treatment, you may have to pay a flat extra premium for a certain period of time until you are considered cured or in remission.
- HIV: If you are HIV positive, you may have to pay a flat extra premium for life or until there is a cure available.
- Alcohol or Drug Abuse: If you have had a history of alcohol or drug abuse or are currently in recovery, you may have to pay a flat extra premium for a few years until you prove your sobriety.
Dangerous Occupations
Some occupations that can lead to a flat extra premium are:
- Military: If you are on active duty or deployed in a war zone, you may have to pay a flat extra premium for the duration of your service.
- Aviation: If you are a pilot or work in aviation-related fields, you may have to pay a flat extra premium depending on your experience and type of aircraft.
- Mining: If you work in mining or related fields, you may have to pay a flat extra premium due to the hazardous nature of your job.
Risky Activities
Some activities that can lead to a flat extra premium are:
- Skydiving: If you are an avid skydiver or plan to skydive in the future, you may have to pay a flat extra premium for as long as you engage in this activity.
- Scuba Diving: If you are an experienced scuba diver or plan to scuba dive in the future, you may have to pay a flat extra premium depending on your depth and frequency of diving.
- Racing: If you are involved in any form of racing, such as car racing or motorcycle racing, you may have to pay a flat extra premium due to the high-speed and high-risk nature of this activity.
Ways to Approach Flat Extra Premiums
If you are faced with a flat extra premium on your life insurance policy, there are some ways that you can approach it:
- Negotiate with Insurance Companies: You can try to negotiate with your insurance company to lower the amount or duration of the flat extra premium. You can also shop around and compare different offers from different insurers to find the best deal for your situation.
- Look for Alternative Options: You can look for alternative options that may not require a flat extra premium, such as group life insurance, guaranteed issue life insurance, or no exam life insurance. However, these options may have other drawbacks, such as lower coverage amounts, higher premiums, or limited benefits.
