Life Insurance Information Dictionary

Flat extra definition

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The Dictionary of Life Insurance Terms

Insuring an individual who engages in hazardous activities means paying a higher price for coverage.  The standard way to assign these higher prices for dangerous activities is for life insurance companies to add a flat extra to the usual premium.  A flat extra is usually a few dollars per year, for each thousand dollars of coverage your policy provides.

That may sound like small change, but a flat extra can far outstrip the base price you pay for coverage.  For example, suppose that you are a 40-year-old in good health, nonsmoker.  You might find a quarter million dollars in coverage for $198 per year.  A flat extra of $3 per thousand dollars of coverage comes to $750 per year (3.00 · 250 = 750).  Add that to your base price ($198/yr), and you get a price that's nearly five times what you were paying before the flat extra was applied.

Consequently, it's well worth the trouble to find an agent or agency that has experience placing high-risk life insurance policies among a broad range of life insurance companies.  More than once, an experienced agent has known the right company and the right information to get an applicant initially deemed high-risk covered as a lower risk.

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