If you’ve been researching a life insurance purchase, you know that the better your health, the better your premiums will be. But sometimes a life insurance customer will be deemed “uninsurable” at any price — whether it’s due to a history of severe health problems, a disease diagnosis or even a profession that makes the applicant too “risky” to insure.

“Working with an advisor is the best way to determine if you’re uninsurable or not,” says Jack Dewald, spokesperson for the Life and Health Insurance Education Foundation. “Don’t give up. Just because one company says you’re uninsurable doesn’t mean you’re universally uninsurable.”

If you’ve been relegated to the category of “uninsurable” but have need for life insurance, there are still ways you can get life insurance without going through the underwriting process, although each involves its own trade-offs.

1. Max out your group life insurance at work

Group life insurance allows you to purchase life insurance no matter what your health condition, up to a certain amount. Some employers offer a “free” basic life insurance amount (where the company pays the premium), such as an amount equal to one year’s salary, with the option to purchase more at your own expense. Your employers group life plan may require evidence of insurability (EOI) if you want to go over a set amount. However, as long as you remain under the EOI level, group life is an excellent way for the “uninsurable” to secure life insurance at group rates.

Remember also to max out the group life you can buy through your spouse’s workplace benefits.

The downside: Benefit levels are usually a low multiple of your salary, which may not cover your beneficiaries’ needs.

According to JHA’s “2007 U.S. Group Life Market Survey,” the average face amount for voluntary group life policies (meaning those paid for by the employee) in-force in 2007 was $74,109 and the average premium “per life” was $234.

If your group life benefit is low and you work at a small company, you may be able to get your employer to increase it. “Sometimes a cooperative employer may bump up a group term life amount to accomodate someone’s needs for coverage,” says Dewald. “A small business may be able to negotiate with its agent to increase the amount without evidence of insurability.”

2. Convert your group life policy to an individual policy

Group life insurance usually allows you to convert your group policy to your own individual permanent policy, without going through the underwriting process. Your premiums are based on your age only. This assures you a lifetime of coverage even if you leave your job.

The downside: You generally convert policies dollar for dollar, according to Dewald, so if your group life policy is worth $50,000, that’s the maximum available on the converted policy. In addition, there is usually no choice of policy types. Nonetheless, notes Dewald, “You know the old saying: A little bit of something is better than a whole lot of nothing.”

3. Buy a survivorship life insurance policy that insures both spouses

Under a survivorship (also called second-to-die) policy, a husband and wife are insured together and the benefit is paid only only after the death of both. This kind of policy is commonly used by couples who want to provide funds for their heirs to pay sizeable estate taxes.

The advantage here is that an “uninsurable” spouse will have no trouble becoming insured under a survivorship life policy because the insurance company is not underwriting him or her separately. For example, New York Life Insurance Co. offers survivorship policies that allow one of the spouses to be “uninsurable” as long as the other spouse is under age 80 and a qualifies for a “substandard” rating or better.

The downside: If your spouse needs to receive a benefit as soon as you pass away, this kind of policy won’t help.

Phoenix life insurance co. has solved that problem. It automatically includes a “policy split option rider” on its survivorship variable universal life policies (called The Phoenix Edge-SVUL) and a “policy exchange option rider” on its Joint Edge policies. These riders allow you to split your survivorship life policy into two separate single-life policies, without further evidence of insurability and without incurring a surrender charge. New premiums are based on the ages of the husband and wife. The face amounts of the new policies can be different but their sum cannot exceed the base value of the original survivorship life policy.

4. Add a “Spouse’s Paid-Up Insurance Purchase Option” (SPPO) rider to a permanent policy

Here’s a rider that can provide free life insurance coverage to an “uninsurable” spouse. It would be ideal in situations where a husband and wife can wait for the benefit to be paid until both are deceased. Here’s how it works with an SPPO rider from New York Life Insurance Co.: Say a husband is “uninsurable” due to health conditions, but his wife obtains a permanent life policy with a no-cost SPPO rider. (These riders are automatically included by New York Life on most of its permanent life policies.)

When the wife passes away, the husband can purchase a new single-premium paid-up life insurance policy on himself within 90 days. The premium is based solely on his gender and age at the date of the new policy. The face amount can be equal to or less than the original policy. The husband could even use part of the benefit for funeral expenses and put the remainder toward his paid-up policy.

5. Buy a guaranteed issue policy

Guaranteed issue policies require no medical exam. Anyone (below a certain age) who answers a few medical questions can buy a policy. Applications will likely ask for your height and weight, whether or not you’re a smoker and basic questions about your health history. If you answer yes to a question you may be knocked out of eligibility.

The downside: There’s a price to pay for the convenience of guaranteed issue:

• You’ll pay far higher premiums than you would if were able to secure an underwritten policy — so high that you should calculate the year when you will have paid more in premiums than your beneficiaries will receive.
• Face amounts tend to be $25,000 and under (in other words, enough to cover a funeral).
• Insurers may impose age requirements (for example, selling only to those age 50 to 85).
• A guaranteed issue policy may not pay out the full benefit for a few years after you buy it. For example, if you die within a year after purchase, your beneficiaries may receive only a refund of your premiums; if you die in the second year, they may receive half of the policy amount.

Pay close attention to the benefit terms if you’re comparing guaranteed issue policies. Consult your life insurance agent about your chances for qualifying for an underwritten policy before buying a guaranteed issue policy. For more, read The basics of guaranteed issue life insurance.

Preventing “uninsurableness”

You can take action to prevent your children from becoming “uninsurable” as adults. “Insurance isn’t all about the right here and the right now,” says Dewald. “You can protect for things you don’t know about.” If you’re considering buying life insurance on your children, Dewald suggests looking into a “guaranteed purchase option” (GPO) rider. This gives the child the right to purchase additional coverage amounts as they get older, at certain ages, no matter their health. You must add this rider at the time of purchase.

6. Buy a simplified issue policy

Simplified issue policies require that you answer several health questions, and there’s no medical exam. If you make the cut, you’ll likely pay less than you would for a guaranteed issue policy. It’s important to shop around.

7. Buy life insurance through an “affinity plan”

Occasionally a professional association (like a bar association or union plan) will offer guaranteed issue or simplified issue policies to their members.

The downside: Guaranteed issue and simplified issue purchased this way will still come with steep premiums, and life insurance through affinity plans is not readily available.

8. The last resort: Credit life insurance

Credit life policies are often available when you make a large purchase that is financed.

The downside: “Generally the worst insurance you can buy,” sums up Dewald. “It’s horribly priced, but if you get to that point. . . .” So, for example, if you buy a new car and want to be sure your spouse could pay it off in the event of your death, credit life would fill that need. This policy covers only the remaining balance on the purchase. For more, read The basics of credit insurance.