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Don't qualify for life insurance? Check out these alternatives

Oct 09, 2023 | RBC Wealth Management


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If life insurance isn’t an option for your family, read the new issue of Investor’s Edge to learn about other options that may work in your wealth plan.

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Purchasing life insurance coverage early is recommended to help keep costs reasonable when creating and managing a thorough protection strategy for your wealth plan. But for some people, insurance options may not be cost-reasonable due to existing health conditions.

In 2018, the Milliman Long Term Care Insurance survey reported only 59% of applicants for long-term care insurance ended up with coverage—of the 41% who did not purchase coverage, 25% were declined for health reasons. Thankfully, there are options available that may cater to your unique needs and offer ways to help you secure the future for you and your loved ones when conventional coverage is not a practical solution.

Annuities

These insurance contracts do not require underwriting and are designed to pay out invested funds in the future for a specified period of time or the remainder of your life, depending on the type of annuity you purchase. Your cost is a series of either monthly or lump-sum payments, and once the annuitization period is over, you will receive the cash payments. There are many tax considerations that occur with annuities, so be sure to work with your financial advisor to determine the best plan for your situation.

Guaranteed issue life insurance

For individuals with potentially disqualifying conditions like cancer, use of a handicap parking permit, sleep apnea or heart conditions, to name a few, guaranteed issue life insurance may be a viable alternative. This type of policy does not require a medical exam or extensive health inquiries. It guarantees coverage regardless of your health status. While premiums for guaranteed issue policies tend to be higher, they provide an opportunity to secure a basic level of coverage.

Simplified issue life insurance

Simplified issue life insurance strikes a balance between traditional policies and guaranteed issue coverage. Although you are not required to undergo a medical exam, you will be asked to answer a limited set of health-related questions. This type of policy may work for individuals with relatively stable pre-existing conditions or those with controlled health issues. While premiums may still be higher than traditional policies, they are generally more affordable than guaranteed issue premiums.

Group life insurance

If you’re not retired and still working, you may have access to group life insurance through your employer. Group policies often have more lenient underwriting standards; however, the coverage amount may be limited. You’ll need to determine if some coverage is better than no coverage.

Note: This list isn’t comprehensive, as there are additional insurance options like final expense insurance or accidental death and dismemberment (AD&D) which may provide the coverage you need in your life. Work with your financial advisor to determine what kinds of insurance products will benefit you and your family effectively.

Read additional articles in the Q4 issue of Investor's Edge.

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Wealth planning