Denied Life Insurance? Here's What Dave Ramsey Said to Do Next

Life insurance provides vital protection for loved ones. With the right policy, a covered person doesn't have to worry that those in their care will be left with an empty checking account and no ability to pay the bills.

Since life insurance is so important, it can be very frustrating to apply for a policy and be denied coverage. If this happens, following some advice from finance expert Dave Ramsey could be helpful.

Here's what Ramsey said to do after being denied coverage.

Get more information about the reason for the denial

Ramsey suggested learning more about why the insurer rejected the application for coverage after receiving a denial letter. "Your first move should be to contact your insurance agent or company to find out the why behind your life insurance denial," he advised.

Ramsey is right to suggest making this move first. In fact, taking this step is important for a few reasons.

First, researching the reasons for the denial could make it possible to correct the issue and either re-apply with the same insurer or find another one. For example, if a life insurance company denied coverage due to a risky hobby, it may be possible to get covered by giving it up.

There's also a chance the denial could be based on an error, such as inaccurate information in a medical record. Consumers need to find this out, so they can correct the mistake and avoid being denied life insurance for no reason.

So, follow Ramsey's advice and reach out to the insurance company or an agent who is providing assistance to learn exactly why the application for life insurance wasn't approved.

Work with an insurance agent

Ramsey also suggested working with an independent insurance agent after a life insurance denial to try to find a company that will offer coverage. Normally, it's not really necessary to work with an agent. And some people may not want to if they'd prefer to get quotes from insurers of their choosing rather than those the agent happens to work with. But after a denial, heeding Ramsey's suggestion on this issue could make good sense.

An independent insurance agent who works with multiple insurers will usually know which companies are more willing to approve an application for someone who poses a certain type of risk. An agent can point consumers denied coverage in the right direction rather than those individuals having to potentially apply with dozens of insurers who will absolutely not cover them based on their underwriting guidelines.

Look into getting covered at work

Ramsey's next piece of advice is to try to get covered at work after being denied life insurance. Some companies offer group life insurance as a workplace benefit and, if so, it may be easier to get approved to be covered on a group plan that doesn't require a medical exam first.

The problem is, this coverage is often pretty limited. When I've been offered the chance to buy life insurance through various jobs in the past, the death benefit was well below what I would have needed.

There's also a risk that a person with employer-provided life insurance will lose coverage if they leave their job. This can be a huge problem. Being denied coverage in the first place shows there's already an issue that will make insurers reluctant to offer coverage. Since risks increase by age, waiting to get even older to buy coverage certainty isn't going to improve the situation.

It's better to find a coverage option outside of work now, rather than having employer coverage for a few years and then scrambling to find a policy after a job loss and loss of coverage -- when it's even harder to get covered due to more advanced age.

Wait a while until health improves

Ramsey said there are times when putting off the purchase of life insurance for a while could be a good bet after being denied coverage.

"Sometimes when you're denied life insurance, your best bet is to play the waiting game and give yourself a chance to correct any health issues that led to your denial." He gave the example of someone with high blood pressure who works to reduce it before applying for coverage again.

This advice makes sense if there's a specific health goal consumers are working toward and will achieve in a timely manner that could make buying life insurance easier. This advice is not useful to those with chronic conditions that won't get better. Plus, those who wait will face a greater risk of not being able to get covered at all later due to their advancing age or due to pre-existing conditions that develop or worsen.

So consider carefully whether waiting and trying to apply for coverage in a healthier future state is likely to pay off. And, if it's not, don't listen to this Ramsey suggestion.

Get a different kind of life insurance coverage

Finally, the last option on the table is to get a different kind of coverage. This could include guaranteed issue coverage.

While guaranteed issue policies don't require a medical exam, the coverage limits are often low and there may be waiting periods before the death benefit is fully paid out after a policyholder signs up. These policies can still be better than nothing, but should typically be a last resort.

Still, while Ramsey's advice isn't perfect here, some of his suggestions are worth implementing. Those who were denied life insurance may want to try out his better tips ASAP.