Beyond its ability to accumulate cash efficiently and with certainty, life insurance is just good protection. Life insurance is a way of making certain that the people you leave when you pass on have financial support. It may even assist with final expenses and other major decisions that happen in your absence. If you’re building a generational family bank, the death benefit can even fund the next whole life insurance policy.
So what happens if you don’t get approved for the life insurance you want?
Life Insurance is a Contract
While we think that everyone can benefit from life insurance, it’s an unfortunate truth that not everyone can get life insurance.
Whole life insurance, which is a form of permanent insurance, is harder to obtain than regular term insurance. The reason it’s more difficult is because of the key word “permanent.” Whole life insurance is a contract between you and the insurance company. When all is said and done, you are agreeing to pay all of your premiums, in exchange for a guaranteed death benefit. So long as you hold up your end, the insurance company must hold up theirs. This is what makes whole life “permanent.”
Unlike term insurance, it’s as much of a “sure thing” as you can get. This also means that in order to keep the costs reasonable for everyone and provide as much benefit to as many people as possible, there are some limitations.
Mortality and Life Insurance
Insurance companies have actuaries who study data and determine extremely accurate mortality information. This helps the companies weigh the risk of insuring people. While it may seem harsh to deny someone insurance, this is the glue that keeps companies stable.
Based on someone’s health and lifestyle, it would be a massive cost to the insurance companies to insure someone who may pass within a few years. This is because premiums help you pay for the death benefit over time. If you have only paid a few thousand dollars and then the company has to pay out millions of dollars, there’s a lot of risk to the company.
Of course, accidents and the “unknown” happen. This is why people have life insurance in the first place. Yet insurance companies are able to cover accidents with ease because on the other side they have people with long life expectancies paying premiums.
So What if You Are Uninsurable?
This is a tough thing to face, however, we want to stress that you aren’t without options. If your goal is to build cash value, create a family bank, and extend your legacy, there are other paths for you.
1. Insure Your Spouse
If you’re married, and you wish to have insurance in place to cover your children in an emergency, seeing if your spouse is insurable is a good next step. You’ll still be able to insure your spouse’s income, and have access to a policy for an emergency/opportunity fund.
2. Insure Your Parents
The person who pays for the insurance doesn’t have to be the same person the company insures. In other words, you can pay for a policy on your parents, that insures them. As the owner of the policy, you have access to the cash value. All this means is that the death benefit is tied to the insured. So in the event that your parent passes, the insurance company will pay a claim. You can also identify yourself as the beneficiary of this policy.
As long as you have “insurable interest” in someone, you can buy a policy for them. This simply means that there’s a real and tangible reason that their passing would effect you.
3. Insure Your Children
It is also possible to have insurance on your children. Though the amount of death benefit you can purchase on a child is much lower than what you can purchase on an adult. However, there are many benefits to insuring your children.
For starters, you can treat your child’s life insurance policy as “training wheels” for teaching your children good money habits. As they age, they’ll want to make purchases. Use a policy loan to make those purchases and teach them how to pay those loans back. All the while, the policy will be accumulating. Eventually, the policy might even help them buy a car, go to college, or start a business.
And, once your child turns eighteen, you can gift the policy to them and they can pay their own premiums.
Another upside to insuring your children is that you can lock in their future insurability, in the event that they develop a condition that makes them uninsurable.
Don’t Wait Until It’s Too Late
If you’re thinking about getting an insurance policy, particularly a permanent insurance policy, there’s no better time than right now.
The future isn’t guaranteed, and there’s no way to predict what will happen. This is why insurance provides so much peace of mind: because it’s a buffer against the unknown. The sooner you have it in place, the sooner you can have this peace of mind.
Sometimes, things happen that make us uninsurable. Certain health conditions can develop that make it too risky. Yet once you’re covered, you’re covered so long as you pay premiums. This is priceless.
A Word of Caution About Online Insurance
If you’re ready to go and get an insurance policy right now, be wary of online insurance companies that make it too easy. If you’re wanting a whole life insurance policy with permanent coverage, there are certain hoops you’ll have to jump through. This includes a medical exam and health questionnaire, among other things.
If an online platform like Lemonade or Ladder promises quick coverage, you’re likely applying for term insurance. Term insurance isn’t bad, however, it has no cash value component, and gets significantly more expensive once you reach a certain age (making it nearly impossible to afford when you really need it).
We prefer to use term insurance as a supplement to whole life insurance, in case you want additional death benefit. This helps you feel fully insured, up to your Human Life Value, while still having a cash value account.
Want to See if You’re Insurable?
If you’re ready, let’s talk! Prosperity Thinkers can help you understand your insurance options, and help you develop a game plan if you find out you’re uninsurable. We’ll help you feel good about the process, no matter the outcome, so that you can take part in all that life insurance can offer.