MR. WATSON: Statistically speaking, young people usually aren't rated. They're in good health. You are not going to jump out of planes or anything like that, are you?
WOMAN: No.
MR. WATSON: So you won't be rated. But, if you do hazardous things, have health problems, or if you have high blood pressure or anything else, if you apply for insurance you might be rated.
WOMAN: Is it based on family history?
MR. WATSON: It can be.
MR. WATSON: So we have a $100,000 policy. Insurance is priced per thousand. And let's say you are going to get rated. We are going to rate you sub-standard. We will charge you more money. A person your age might pay $10 per thousand. $10 multiplied by what? 100, because the policy is for $100,000. It would be $1,000 a year in premium. Do you agree?
ALL: Yes.
MR. WATSON: But let's say that you have high blood pressure and they're going to rate you. There are several methods of rating a sub-standard risk.
Methods of Rating Sub-Standard Risks
MR. WATSON: The first & most common way is called an extra percentage table . They charge you anywhere from 125 to 500 percent of standard. That's a lot.
ALL: Wow.
MR. WATSON: Determining how much the rating is depends upon the degree of risk that you bring to the table. Do y'all agree?
ALL: Yes.
MR. WATSON: If the condition that caused the rating ever removes itself through diet or exercise or you stop jumping out of planes, you can apply to have the rating removed.
MR. WATSON: There's two other ways to rate an individual. They're basically the same. Number 2 and Number 3 are basically the same.
Here's the deal. Temporary or permanent flat extra premium. We tack on a dollar charge here instead of percentage tables. We might tack on another $40 per thousand. $10 plus $40 is $50. $50 times 100 would be $5,000. The end result is the same. Do you agree?
ALL: Yes.
MR. WATSON: If it's a temporary, we will issue this rating temporarily. You can have a temporary rating for five years. Maybe you had cancer, heart problems. We will rate you for ten years. If permanent, it's on there permanently.
MR. WATSON: Everybody is underwritten (evaluated), but not everybody is rated. Do y'all agree with that?
MAN: Yes.
MR. WATSON: Methods of rating substandard risks -
- extra percentage tables
- permanent flat extra premium
- temporary flat extra premium