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You wouldn't know it from the terrific prices you see advertised for life insurance these days, but the best deals are beginning to disappear. Rock-bottom premiums still exist, but insurers are tightening the criteria that determine who gets their best rates. Those who don't measure up pay more.
"There are so many traps to keep you from getting the lowest rate that very few people get it," says Byron Udell, chief executive officer of insurance brokerage AccuQuote. "In essence, it's a rate increase in disguise." Among the changes that are driving premiums higher:
A cholesterol level of 240 or lower with an HDL level of 6.0 used to earn you a cheaper rate, says Udell. Now, some companies demand 210 and 4.0.
Height and weight requirements have shrunk. Many companies used to grant 6-foot-tall men a better rate if they weighed up to 230. Now some require a svelte 192.
Most companies deny a lower rate to anyone on blood-pressure medication.
In the past, you forfeited a better rate if one of your parents had certain conditions that resulted in death before age 60, says Todd Ewing, senior vice-president for insurance marketplace InsWeb. But now some companies knock you out of the best rate class if any siblings or grandparents developed a disease before age 60, even if they lived for decades after the diagnosis.
Insurers check driving records because people with a lot of tickets are more likely to get into fatal accidents. You used to be okay as long as you had no more than three moving violations in the previous two years. Some firms now withhold the best rate if you have received two tickets in three years.
Avoid the crackdown
The good news is that few insurers are tightening up on all these fronts. Firms generally pick one or two criteria, which means that you may qualify for a better rate at one company but not at another -- and that could save you a few hundred dollars each year. "What's amazing to me is how differently these companies look at different risks," says Pat Wedeking, president of TermOnly.com, a life-insurance marketplace.
Just ask Carl Jean-Baptiste, 33, of Baltimore. When he and his wife, Rachel, started talking about having children, they realized they'd need more life insurance than he had through his job as a corporate health-care lawyer. AccuQuote quoted a rate of about $2,300 per year for a $1-million policy with a 30-year rate guarantee, which would keep premiums stable until long after their new baby, Colette, graduates from college.
But the premium jumped to about $4,000 when Jean-Baptiste's driving record was factored in. The insurer, AIG, had just tightened up its rules about moving violations. Jean-Baptiste lost the top rate because he had received three speeding tickets soon after he bought his Acura 3.5 RL about three years ago. Since his record has been spotless since then, AccuQuote re-shopped the policy with Prudential, which was more lenient about the tickets. Annual premium: $2,785.
Or consider the experience of Jim Williams, 48, of San Diego. Both State Farm and Allstate quoted an annual premium of about $1,800 for a $600,000, 20-year term policy, in part because of his cholesterol level. But TermOnly.com found that AIG would not penalize his cholesterol level and sold him the policy for $1,260 a year.
Because the standards vary so much from company to company, it's essential to work with an insurance broker or Web site that deals with many insurers and knows which ones tend to offer the lowest rates for someone in your situation. The best brokers ask a lot of questions upfront, so the rate they quote is closer to the rate you can actually get. Online insurance brokerage Insure.com even offers each company's underwriting criteria with its quotes, explaining exactly what you need to do to qualify for the quoted rate.
--Reporter: Elizabeth Kountze
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