What is a Flat Extra Charge and How is it Used?

Life insurance rate classes are generally thefor 5 years, or it can be permanent. A good example
determining factor in what your premium will be for aof something that would require a permanent flat extra
given amount of insurance. Plug in your age and theis if someone has what is considered a dangerous
cost per thousand for, say, a standard plus rate classoccupation or hobby.
and there it is.Let's say I'm perfectly healthy (fun to make believe
While what they are called may vary from companyanyway), but I happen to be a helicopter pilot for the
to company, in general the four primary rate classesDenver police. The insurance company would be OK
are preferred plus, preferred, standard plus andwith letting me slide as a helicopter pilot flying privately,
standard. For the sake of some examples we'll use abut they see an added risk to the fact that I chase
57 year old guy (me) who wants $250,000 of 15 yearrobbers, so they decide they want to charge a
term insurance. At preferred plus rates my annualpermanent flat extra charge of $2.50 per thousand
premium would be $725. If at best I qualified for aper year to cover that risk. So, my health gets me
standard rate it would be $1305 annually.$250,000 of 15 year term for $725 a year and my
If my health wasn't good enough to qualify for aaviation practices will cost an additional $625 (250 x
standard rate class the companies have three options.$2.50) a year. My total premium would be $1350 a
The first, if they consider my mortality risk to be highyear and that would cover all causes of death
enough, is to decline to offer coverage. In that case Iincluding an accident while flying. That extra charge
would review the reasons for the decline and shop itwould stay there as long as I was participating in that
to other companies to see where I might at least get atype of aviation. If I retired from the police department
rated policy.and kept flying privately I could likely negotiate dropping
"Rated" refers to a premium determination methodthe $625 charge.
called "table rating" where each table represents 25%A good example of when a company might use a
above a standard rate. So, if I had a two vesseltemporary flat extra is after successful treatment for
angioplasty 4 years ago and a company determinedkidney cancer. The company guidelines might indicate
that I qualified for a standard table 4 rate, that wouldthat they should charge a $5 flat extra per thousand
be 100% above a standard rate, or about $2600per year for 5 years after treatment is finished. In
annually. Now just so no other agents throw darts atmost cases a temporary flat extra is added to either
me, all companies don't rate off of standard. Somea standard rate or a table rated premium. So, if I have
rate off standard plus and some rate off of a mythicalto pay $1305 for my policy at a standard rate and a
"Special" rate that only company software canflat extra of $1250 (250 x $5), for the first 5 years my
compute. There are also a few companies that don'tpolicy would cost $2555 a year. Since the flat extra is
use 25% per table, but generally speaking it is 25% pertemporary, the rate would automatically drop back to
table added on to the standard rate class.the standard rate of $1305 in the 6th and subsequent
Table rating is the premium determining method foryears.
most health issues. If a person is diabetic, obese, hasBottom line. Whatever the end result, the way your
heart disease or has a history of mental health issues,premium is determined is a measure of the
these would be likely table rating scenarios.underwriter's take on your mortality risk. The good
The other way insurance companies handle highernews, even when the conclusion is a table rated offer
than standard mortality risks is what is called a "flator has a flat extra charge, is that you're being offered
extra" charge. The flat extra can be temporary, saycoverage that doesn't have any restrictions on it.