Ask an expert: getting life insurance after a major diagnosis

Question

“Hi, my name is Karen. I have a question on insurance—I’ve been diagnosed with a serious medical condition, and now it’s really hard for me to get life insurance. I don’t want anyone to have to start a GoFundMe for my funeral or anything like that. What can I do in cases like this?”

Answer

Hi Karen. Thanks for reaching out! My name is Kimbree, and I’m an Accredited Financial Counselor® with a background in financial planning and economics. I have also been a practicing financial coach for the past nine years.

I’m so sorry to hear about your recent medical diagnosis. News like that is never easy. And it often brings up thoughts of end-of-life planning for those who receive it. Your worry about funding end-of-life expenses is very common. Especially with the average funeral costing between $7,000 and $12,000. 

It’s great that you want to take action and understand your options. You’re right, in your situation, it might be hard to get traditional life insurance. But there are other options! Let’s talk through them.

Why Life Insurance Gets Harder After a Major Diagnosis

First, it’s important to understand why it’s harder to get life insurance after a major medical diagnosis. When you apply for a life insurance policy, they consider key pieces of information about you, like your career, medical history, and any conditions you may have. This information is looked at to get a picture of your overall risk. Your risk level determines your premium and how much insurance you’re eligible for (your death benefit). If you have a pre-existing medical condition, you may face steeper insurance premiums, making policies unaffordable. You might also be denied coverage because you are considered to be too great a risk. 

Ideally, this is why everyone should get life insurance as soon as they can to get coverage prior to any big life changes or diagnosis. At this stage, a term life insurance policy that will cover you for a set number of years is often the most affordable option. But that’s not always the way things work. If you receive a diagnosis before you get a life insurance policy, it’s good to know your options and understand that you aren’t alone.

Alternatives to Traditional Life Insurance

If you can’t qualify for traditional life insurance, there are other options available to you. Things like guaranteed life insurance, final expense insurance, or group life insurance might help you get the coverage you need. 

Guaranteed Life Insurance

One option available to you is guaranteed life insurance. As the name suggests, these are policies that you are guaranteed to get. These policies don’t have medical exams or pre-existing conditions, or diagnoses aren’t considered. Typically, the premiums are fixed, and the coverage is guaranteed for the duration of your life.

There are some drawbacks to these policies. Typically, these policies come with lower coverage amounts. Because anyone can get a policy and individual risk isn’t considered, the premiums are often higher. Often, these policies will include a waiting period. This is a period during which the policy needs to be in effect before the full death benefit will be paid. A typical waiting period is two to three years. It is possible to get a guaranteed life insurance policy with no waiting period, but it will come at a higher premium.

If you have money in your budget and want a life insurance policy that is more like a traditional policy, a guaranteed life policy might be a good fit for you. 

Group Life Insurance Through Work or Associations

Another option that might be available to you is group life insurance. If you are currently employed, your company may offer group term life insurance. If you are unemployed, you may be able to get a policy through a college alumni association, a union, or a professional organization (see resource section at the end of the article).

Membership organizations, such as AARP or even Costco, also offer life insurance options. When offered by an employer, some or all of the premiums might be covered as a benefit of your job.

Group policies can be good for those with pre-existing conditions or major medical diagnoses. This is because often they have no medical questions or exams at sign-up. These policies can be more affordable if an employer pays for some or all of the premium. And even if they don’t, you might find coverage affordable because the risk is shared by everyone who has a policy. These policies often have lower death benefits, but you could still get enough coverage to take care of final expenses. 

One thing to keep in mind is that if you are insured through an employer’s policy, the policy may not be portable. This means that if you quit your job, you will lose coverage.

You can also check out SaverPerks partner, Everyday Life. They can scan their database of insurance carriers to try to match you with a customized life insurance plan. 

Final Expense Insurance

You mentioned that final expenses like funeral costs are a concern for you. This is common, especially after receiving a major medical diagnosis. No one wants to feel like a burden to those they love. Final expense insurance is an option that can help you with this. Final expense insurance, also known as burial or funeral insurance, is a whole-life insurance policy that is designed to help with end-of-life costs. This kind of policy is designed to help pay for final medical expenses, along with cremation, burial, and funeral expenses. Typically, these policies have a smaller death benefit that can cover final expenses. 

These insurance policies have a few advantages. First, the premium is usually fixed and won’t go up as long as the policy is active. Second, these policies often don’t require medical exams. Instead, you would answer a few medical questions on a questionnaire as you apply. This can help those with pre-existing conditions or who are older qualify. These plans can provide peace of mind for the insured and financial assistance with final expenses for the loved ones left behind.

Building a Backup Plan Without Life Insurance

Life insurance is a great way to help your loved ones take care of your final expenses. But it isn’t the only way. You can build a backup plan without life insurance.

Creating a Will

It’s important for everyone to have a will in place. A will helps determine what happens to anything you leave behind when you pass away. It is also a place that allows you to designate guardians for your children. A will helps ensure your wishes are honored.

You can draft a will inexpensively, especially if your situation isn’t complicated. In your will, you will name an executor. This is the person who carries out your final wishes. You can also designate how assets, even small ones, should be distributed. In your will, you could designate specific assets to help cover final expenses and funeral costs. 

Setting Up a Payable-on-Death (POD) Account

You could also set up a payable-on-death (POD) account. A POD is an account that you designate will go to a trusted person after your death. This account designation allows the account to skip probate and be directly transferred to the person you have chosen. You could create such a transfer and let your trusted person know that the funds are to be used to pay your final and funeral expenses. To create a POD account, you typically fill out a form with your bank or financial institution.

It’s important to note that setting up a POD account doesn’t limit or change your access to the account while you’re alive. You’ll still have control over the funds during your life, and they won’t transfer until your death.

Prepaying Funeral Costs or Creating a Funeral Fund

You also have the option to work to cover the cost of your funeral while you’re alive. There are two ways you can accomplish this. 

First, you could pre-pay for your funeral costs. If you choose to do this, you’ll want to contact the funeral home you plan to use. They can help you understand the costs, what’s covered, and any necessary paperwork you need to fill out. 

Second, you could set up a savings account for your funeral/final expenses. This account could be at your regular bank or credit union. You could also open a high-yield savings account. If you have the means, you could fill the account to cover your funeral costs when you open it. If you don’t, you could put aside a certain amount of money each month until you reach your goal.

Pre-paying for your funeral expenses or setting up a dedicated savings account can help your loved ones with your final expenses. But for it to be effective, you must make them aware of your plans. You could put the information in a side letter of instruction to your will. This would allow you to detail what expenses are covered, where the money is, and what funeral home you’d like to use. Alternatively, you could make a trusted person or two aware of your plans so they can take care of it for you when the time comes.

Talk to a Professional for Personalized Help

Finally, it can be helpful to get personalized advice from a professional. They can make sure your unique needs are met, and all your bases are covered. You could reach out to a financial advisor. You can find an advisor through SaverPerk partner, Advisers Give Back. This group matches you pro bono with an advisor who can help with your individual situation. You could also reach out to an estate planner or find an insurance broker who specializes in high-risk or final expense policies.

You’re Not Alone—There Are Still Options

Getting a major medical diagnosis is never easy. And it often comes with concerns about the future, your finances, and those you might leave behind. It’s important to remember that you aren’t alone, and you still have options.

While traditional life insurance may be out of reach, there are still meaningful ways to prepare and protect yourself and your loved ones. Remember, financial planning isn’t all-or-nothing. Taking small steps to cover yourself and get things in order will make a difference. These micro actions can help you feel more confident and prepared, no matter what lies ahead.

Resources

AARP – Membership for those 50+; low annual fee, offers life insurance through partners.
National Association for the Self-Employed (NASE) – Group insurance options for freelancers and entrepreneurs.
Freelancers Union – Free membership offers health, dental, and life insurance options.
Everyday Life – SaverPerks partner offers custom life insurance plans designed to protect your family.
Advisers Give Back – SaverPerks partner offers pro bono financial advisor who can talk to you about your unique situation.