Rate Class
What Does Rate Class Mean?
A rate class is a group of individuals that insurers use as a basis for determining premium pricing. Depending on the type of risk insured, factors such as health status, driving history, or income levels may be considered. The insurance company’s underwriters are responsible for assigning applicants to the appropriate rate class.
It is also referred to as the risk rate.
Insuranceopedia Explains Rate Class
For example, in life insurance policies, underwriters classify applicants into three rate classes:
- Select
- Preferred
- Standard
Applicants in excellent health with healthy lifestyles are classified as Select and are offered more affordable premiums. Those with health and lifestyles closer to average are placed in the Preferred category and offered premiums in the typical range. Finally, applicants with below-average health and lifestyles may be classified as Standard, meaning they would pay the highest premiums.
