I often have the budget discussion with people who fall into the less than perfect health category, impaired risk life insurance in the industry. They don’t get the bang for the buck that someone young and healthy, or for that matter over 50 and healthy.
My advice is always the same. Don’t throw away an approval just because you can’t get what you wanted. Stick to your budget and get as much as you can. Seriously, do you think your spouse or life partner, is going to think less of you because your health only allowed you to buy $100,000 or $250,000 worth of life insurance. When you die and you haven’t busted the budget and you have left them all you could, they’re grateful. Trust me. I talk to widows all the time and they never talk about what a cheap, thoughtless so and so you were.
Dave Ramsey and I agree about a lot of things and probably the most important of those is budget. You may have wanted $500,000 to leave to your family or maybe $1,000,000, and you might have to been able to scrape together enough to put it in force, but if it doesn’t fit in your budget, ultimately it won’t work and the policy will lapse. Carrying a lot of insurance might seem like the right thing to do, and I’ve even suggested that if it works in your budget, carrying a little more than is financially needed is a nice thing to do. Why not leave your family a little better off than they were if you can afford it?
I have a client in the medical field who is probably great at what he does, but he doesn’t manage money for a living. I don’t even think it’s one of his hobbies. He wanted $3,000,000 worth of life insurance and unknown to both of us, he had high cholesterol (did I say he was good at what he does?). When the policy was approved it blew the doors off his expected budget. I suggested to him that he put a lower amount in force until he got his cholesterol numbers where they needed to be, but he put the policy in force at the full face amount.
He struggled to keep the policy in force and ultimately it lapsed. A few months later he decided he wanted to get a new policy. I suggested that he just reinstate the old policy and ask for a death benefit reduction, but he again applied for the full amount and again was bumped a few rate classes because of his cholesterol. We had shopped this based on his old cholesterol readings so we actually got a lower rate, closer to his budget. Good news for about a day. He called me and asked if I could get it increased to $5,000,000. He assured me he could stay on top of the premium payments, but it remains a struggle. It’s anyone’s guess if he’ll have life insurance in force when he dies.
Bottom line. Something is always better than nothing and you should have a budget and don’t let a life insurance agent (or yourself) talk you out of it. A life insurance death benefit is a blessing to the beneficiary. A lapsed policy doesn’t bless anyone but the life insurance company. If someone has talked you out of keeping your budget or if you have self inflicted life insurance damage to your budget, call me or email directly and let’s fix it.