Why was your Life Insurance Application Approved with a Flat Extra Charge?
You may receive notification from the life insurance company that your application was approved with a flat extra charge. What is a flat extra charge? And what causes an underwriting decision to approve an application with a flat extra charge? A flat extra charge occurs when a life insurance risk exists that doesn’t fall into the insurance company’s regular rating classes. The flat extra charge is a specific dollar amount for each $1,000 of face amount of the policy in addition to the premium based on the approved rating class. The flat extra charges are either for a specific number of years (temporary) or for the life of the policy (permanent).
An example of a medical condition that could result in a temporary flat extra charge may be a low stage cancer. The insurance company may approve the application at a standard rating class and a flat extra charge of $5.00 or $7.50 per thousand for 5 years. The insurance company requires the additional premium of the flat extra charge during the initial (temporary) years when the risk of death is greater due to the cancer history. The temporary flat extra charge drops off after this period and the policy continues at the premium based on the regular rating class.
Permanent flat extra charges are usually the result of avocations the insured participates in such as having a private pilot’s license. The flat extra charge could vary between $1.25 to $20.00 per thousand face amount in addition to the regular premium depending on the frequency and/or type of equipment flown for the lifetime of the policy.
Insurance companies will differ with their treatment of risks that might result in flat extra charges. Some carriers may elect to decline an application, whereas, others may approve with no flat extra charges.
About the author: Ken Buccico holds a LUTC designation and has been in the life insurance business for 39 years. His wealth of experience empowers clients to make best possible decision regarding a life insurance policy. To explore the best life insurance option, contact Ken at 1-800-651-1953 or KBuccico@Pivot.com.