To the extent an insurance company can price its policies in relation to anticipated claims, it will be profitable. Towards that end, life insurers have been segmenting applicants into different classes for over a half a century*, starting with gender, then smokers, then healthier than average people.
Generally, and separately for females and males, insurance companies offer a standard class and one or more preferred classes, as well as differentiating all classes for smokers and non-smokers. Some carriers classify cigar and pipe smokers as tobacco users, while others do not.
But what about someone with a significant affliction? To be sure, there are some maladies that are so severe that the insurance company will not insure them, but many are insurable, albeit at a higher premium.
A common cause for a rating is weight. Insurance companies issue “build” charts, which depict the maximum weight one can be to receive each underwriting class. For example, a major carrier’s build chart shows that in order to receive a preferred classification, the maximum weight for someone 5’10” is 223 lbs., and for standard, 250 lbs. To clarify, meeting the weight requirement doesn’t automatically qualify you for that class, as there could be other issues that disqualify you, but not meeting it will automatically disqualify you.
A 5’10” person who weighs more than 250 lbs. will be offered a rated policy, that is, a policy whose premium is higher than the standard premium. Most companies offer about 10 rated classes, so that a 5’10” person who weighs 325 lbs. would be offered a higher premium than one weighing 275 lbs.
In light of this, oftentimes someone who exceeds the build chart maximums will want to wait until they lose enough weight to qualify for standard. I submit that this is the wrong approach, for a couple of reasons.
First, it is not a certainty when or even if the weight loss will occur, and the person, who has a higher than average mortality, will be uninsured. Second, if a rated policy is obtained now and the weight is eventually lost, the rating can be removed.
The important point to note is that when a rating is removed for whatever reason (excess weight, tobacco usage, high cholesterol, etc.), the resulting premium will reflect the age at the time the policy was issued, not the age at the time the rating is removed.
I have come across several cases in my career where a person was paying a higher premium than they should have, because they never applied to have a rating removed. That’s another reason why your life insurance program should be reviewed periodically.
*Not including the Jim Crow pricing to former slaves after the Civil War.