Table Ratings And Flat Extras Explained

Life insurance applicants who do not fit a standard risk class are not simply declined. Insurers use two distinct pricing tools, and knowing which one was applied tells an owner what happens next.

Risk classes come first

Underwriting assigns an applicant to a class such as preferred, standard or substandard, based on health history, build, family history and behavior.

Each class carries its own mortality assumptions, which is what produces different premiums for the same face amount and age.

Class definitions are set by each insurer, so the same applicant can be classified differently by two companies applying different criteria.

How a table rating works

A table rating expresses substandard mortality as a multiple of standard, applied as a percentage increase to the base premium and identified by a letter or number.

Because the increase is proportional, it grows in absolute terms as the underlying premium grows with age or face amount.

Table ratings are typically used for conditions that raise mortality persistently, such as chronic health conditions or significant build variation.

How a flat extra differs

A flat extra adds a fixed charge per unit of coverage rather than a percentage, and it can be temporary or permanent depending on the reason.

Temporary flat extras are used for risks that decline over time, such as a defined period following a treated condition or a recent event.

Permanent flat extras are used for exposures that do not change with age, most commonly hazardous occupations or avocations.

Why the distinction matters to an owner

A temporary flat extra ends on a stated date, and the premium drops automatically at that point if the contract says so.

A table rating usually continues unless the owner requests reconsideration, which is a separate process the insurer is not obliged to offer.

Reading which mechanism was applied, and on what terms, is the difference between waiting for a scheduled reduction and having to ask for one.

Reconsideration and shopping the rating

Many insurers will review a rating after a period if the underlying condition has improved, requiring updated records and sometimes a new exam.

Ratings are company-specific, so an applicant rated at one insurer may be offered different terms elsewhere, which is why brokers shop substandard cases.

Replacing an existing policy has its own consequences, including a new contestability period, so it is a decision to work through with a licensed agent rather than on price alone.