Wouldn’t it be great if everything always went as planned? You determine how much life insurance you want. You figure out how long you need it for and you set a budget based on what you believe it will cost. Check, check and check!
But what do you do when things go the wrong direction on you? What happens when underwriters have a completely different opinion of your health issues after reviewing your medical records? What if, in the end, the cost per thousand dollars worth of life insurance is much higher than you anticipated?
Well, in the absence of an overwhelmingly compelling argument for the increased rate, I am a huge advocate of a second opinion. Generally at the point where you have an approval, as disagreeable as it might be, you also have the advantage of having all of the medical records in house and the advantage of seeing exactly what the underwriter saw that turned them away from the rates you were expecting. So, as your agent we shop it fully disclosing everything we think might affect the rate. While we may not get back to your original expectations for rates, in many cases this can improve the picture dramatically.
But let’s talk about the other way it can go. What if, after shopping it to tears, we find that the first offer wasn’t just the best offer, but the only offer? What if once we have peeled back all the layers of your medical information, that original offer starts to look like, if not the best you will ever do, at least the best you are going to do in the foreseeable future? It’s time to have a heart to heart with your agent, your spouse and reality.
Let’s say that your original budget was $2000 a year and your application was for $1,000,000 of 30 year term. At the approved rate, which we have found is as good as it will get for now, you can get $250,000 of 30 year term, $500,000 of 20 year term, $750,000 of 15 year term and $1,000,000 of 10 year term. The question then turns back to the medical records. Is this a short term issue that with effort and good followup will change favorably over the next few years? Is there a good possibility, given optimal improvement, that you can get back to the original rate class within a few years (a discussion between your agent and the underwriter can answer this question)? Or is this really as good as it is going to get ever?
If the issue is one that can be turned around in 2 or 3 years and you can get back to the original rate class, there is some logic to taking one of the two highest face amounts. It is, after all, the amount of insurance you felt you needed, and if you can reapply in a few years and get it back down close to the original rates, you will have had the coverage amount you wanted and within a few years you will be able to have both the amount and the term length you wanted at very close to the original rates.
If, on the other hand, the issue is not something you can expect to go away or at least something that won’t be viewed differently by an underwriter in the near future, it’s time to decide what’s more important, death benefit or term length. Is it possible, knowing that life insurance may not be a long term fix, that you can use a shorter term to get things (assets, debts paid down, etc) that will allow you to have less or no insurance in the future?
I think it’s imperative to avoid knee jerk reactions in either direction. Your budget didn’t come from nowhere, so don’t increase your budget unless you know it’s sustainable. And having the insurance was a real need before you got the bad news, so don’t take your bat and ball and go home just because you suddenly don’t like the rules of the game.
Bottom line. Stick to your budget and determine what your priorities are and put the life insurance in force. It may not be what you wanted, but something is always better than nothing.