Risky Business: What You Need to Know About High Risk Life Insurance

Life Insurance Agent:  Do you participate in any high risk activities?

Person seeking life insurance:  I’m getting ready to base jump of a 10,000 foot mountain this weekend.  Does that count?

Life Insurance Agent:  <Silence>

high risk life insurance - base jumping
When you’re trying to get cheap life insurance, participating in “high risk” activities is not going to do any favors to your checking account.

High risk, as viewed by a life insurance company, doesn’t just look at base jumpers, sky divers, or deep water scuba divers.   Being high risk can also mean you have high blood pressure, diabetes, sleep apnea, and a host of other medical conditions.

Being a high risk candidate basically guarantees your premiums will be much higher, but when you have beneficiaries or a spouse that needs to be taken care of no matter what happens to you, buying a life insurance policy is critical.

If you are not an ideal candidate for life insurance, it may be difficult to get approved for a policy. In some cases, you can still get approved for high risk life insurance, depending on your situation.

Working in a risky profession or if your health isn’t that great, you fall into a category known as impaired risk. If you find yourself in a situation, there are steps that you can take to increase your chances of getting approved for a life insurance policy.

Here are a few factors to consider about high risk life insurance.

High Risk Insurance Basics

In the area of life insurance, insurance companies look at the amount of risk that comes with every policy. They determine how much that you’ll have to pay in premiums based on the level of risk that you bring to the table. Many insurance companies will simply deny a life insurance application if you are considered to be too risky. Others will throw you over into another high risk category.

At that point, you can pay more for a high risk policy or you may be denied for a policy. If you qualify for a high risk life insurance policy easily, then you simply have to start paying your premiums and the policy will be yours. If it’s not that simple for you, you may have to jump through a few hoops (just don’t jump off any cliffs!) before you can be approved for a high risk life insurance policy.

Shopping Around

When you find yourself lumped into a high risk category, you might have to shop around a little bit before you can find a company that is comfortable with your type of risk. The best way to do this is working with an independent life insurance agent that is able work with several different carriers.  Trust me when I say “the more the better”.

An independent agent can also help you switch insurance companies for other products like home and auto coverage to guarantee you are getting the most affordable rates for your coverage levels. They’ll be able to quote multiple insurance companies to make sure you are getting enough life insurance.

I’ve learned many captive agents — those are the agents that are tied to one company — have much stricter underwriting guidelines and without the ability to shop around either leave you stuck with a much higher rate than you should be paying or getting declined and having no life insurance coverage.

Remember: Not every insurance company is the same, and they all have different levels of comfort with various risks.

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Some companies may not touch people in a certain category, while others will welcome them with open arms. This means that if you have a problem getting approved for a life insurance policy, you’ll simply have to do a little bit of research and find out which companies are comfortable with your brand of risk. Then again, this what the experienced independent life agent should be doing for you.

I have countless examples where life insurance companies will rate individuals differently based on their conditions.  Many consumer don’t realize that.  One recent example was a young female who was in good health applying for coverage with me.  On the surface there was no reason that she should not have been approved at preferred plus (the highest rating class possible).  Turns out her mom had passed away early due to breast cancer which made her more of a high risk with most insurance carriers.  The keyword is “most”.

While most carriers would not give her the preferred plus rating class, there are a few companies that will.  If you’re not working with an independent agent this might be something you would never know.

Show That You Can Control It

If the reason that you were considered to be high risk initially can be controlled, then you have a better chance of getting approved for a high risk policy. If the risk controls you and is completely unpredictable, then it will be much more difficult to get you approved.

For example, if the life insurance company rejected your application because of your high level of cholesterol, then you need to be able to demonstrate that you can get it under control again. This may simply mean changing your diet and engaging in a healthier lifestyle. At that point, you can be retested by the life insurance company to see if your cholesterol has improved. (Before you re-take the test make sure to check out 10 tips on preparing for your life insurance medical exam.)

If it has, then they will reconsider your application for a life insurance policy. If it has not improved, then your application will be rejected again. At that point, you may have to wait a certain amount of time before you can reapply for another policy.

Utilize a Trial Offer

In life insurance, there are trial offers that you can sometimes take advantage of which will allow you to qualify for a policy without having perfect health. To participate in this type of scenario, you will work with a life insurance broker or agent who can gather your health information. They’ll ask you a series of questions and determine exactly how healthy you are. At that point, they can send your information to many different life insurance companies at the same time and see if anyone is willing to bite on the risk.

If a company is comfortable with the risk that you present, they will send back a trial offer and a rate for you to consider. If you like the terms, then you can go ahead and fill out a formal application and attach the tentative trial offer to it. At that point, as long as nothing changes on your end by the time the application is processed, you can be approved for the policy.

How Much Do You Really Need?

One of the realities of purchasing high risk life insurance is that the cost will be much more. How much more depends on your exact condition. Before you start shopping around for your policy, you first need to get an idea how much life insurance you need.

Use the calculator below to see the proper amount you should purchase.

Financial Calculator...

Getting High Risk Life Insurance

Getting high risk life insurance isn’t always easy, but it can be done if you are persistent and willing to work a little bit. Once you have a policy, you can rest a little easier knowing that your family is taken care of.

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photo credit: GoneBush via photopin cc

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Comments | 5 Responses

  1. Christian L. says

    Jeff,
    What do suggest for married service members? Is their service considered high risk? Also, what about veterans with service-connected disabilities? Could their injuries be considered high risk? Do you recommend the SGLI and VGLI options?

    I look forward to your thoughts and answers.

    -Christian L. @ Smart Military Money

    • says

      @ Mike

      If you decide to do skydiving later on, it’s on the insurance company. Now if you knew that you were going skydiving a month after you took out the policy and the life insurance company could prove it, that might be a different story.

  2. says

    I have always been under the assumptions that your spouse should get about 5 times your annual income plus the social security benefit. must have heard from the guys that have selling life insurance…lol

    It will give him/her plenty of time to basically get over the loss, pick themselves up financially and possibly even remarry. You should be careful that your spouse doesn’t get rich out of your death. I am not saying that he/she doesn’t deserve the tax free windfall. I am just saying that people are people and it could cause a lot of static in the family just like winning the lottery would.

  3. says

    Just Everything! :) Today most of us are at a high risk life thanks to the stress which is part and parcel of today’s living. So knowing more of what is high risk and investing in insurance by paying a higher premium is definitely worth.

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