Once in a while, we get asked what the maximum life insurance coverage amount someone can apply for might be. While we can give some answers, it really depends on a lot of different factors.
Below, we’ll help you to understand what factors are considered so you can best analyze your own situation. If you need assistance in finding quotes for a life insurance policy of any size, with any conditions, such as diabetes, we can help. We even work with companies who offer guaranteed issue life insurance policies or life insurance for pregnant women, so do not hesitate to ask for help with any special circumstance.
Remember, all information can differ from carrier to carrier, but the majority of information contained here can be used as a general guideline. There are also exceptions which can be made as long as you can show sufficient evidence for obtaining the coverage.
Maximum Life Insurance Coverage Guidelines
It’s not uncommon for us to be asked, “Well, what’s the maximum life insurance coverage you think I can be approved for?” And realistically, it’s different for everyone so it’s a pretty good question. With a few pin-point questions from us, we can usually determine an accurate estimate for what the person may be entitled to apply for and have reasonable expectations for being accepted.
Here are a few topics which help to identify what your personal maximum life insurance coverage amount might be:
While age isn’t a massive factor, it can be a deterrent for some companies to issue a larger policy for certain ages. For example, it would be pretty hard to prove a reason for a substantial life insurance for a child at age 0 without a very good reason. It’s quite common to insure a child, and little to no underwriting is necessary for average size policies. However, a multi-million dollar policy on a child would be tough to stomach for any carrier without clear justification. It’s not impossible, but the insurable interest must be there. While obtaining a life insurance policy on a younger child can be easy due to age and health, the opposite is true for senior adults, for example if you are looking for life insurance for parents over 80, this may be a more daunting task, and much costlier. Though it is not impossible, it will come at a price.
Debts are easier to justify as life insurance can even be a requirement for loans. Because there is a clear reason for the lender to have interest in you paying back the loan, a show of loan documents can be enough to let the insurance company move forward with your life insurance. If this is the case, the maximum life insurance coverage you’ll be able to seek won’t generally exceed what you owe plus any personal life insurance you could otherwise be entitled to. Do note, though, the beneficiary may be restricted to only the lender.
Income is the most common reason for which we see a maximum life insurance coverage benefit being established. Obviously, there would be no reason for a person who makes minimum wage to request a life insurance policy in the millions if it were strictly based on income. The insurable interest simply isn’t there. While some exceptions could be made here, something other than income would need to be presented to alter the decision. Also, the multiplier used varies from company to company and is based on age.
EXAMPLE: A person aged 30 might be able to get as much as 35x their income from one company, or as much as 45x from another. Yet, a person aged 50 might only be able to get 15x their income.
Having a sizable estate is the most common reason for needing to increase the maximum life insurance coverage amount for someone in their later years. In order to meet the looming tax burdens of an estate when a person passes, life insurance is often the best tool to magnify dollars now for later. Having a sizable estate is a difficult and consuming financial process which even utilizes types of life insurance not frequently used by consumers, like survivorship life insurance.
The purpose for the life insurance policy can sometimes make or break your ability to buy a life insurance policy at a high death benefit amount. The purpose of the policy is what helps to establish the insurable interest, meaning a specific reason to have it. The purpose for a policy can range widely, from family needing basic income to business succession planning to charitable giving. There really aren’t “limits” to what could possibly be a purposeful insurance policy, but it has to have a numerical value to which the insurance company can clearly see.
Last, your personal insurability can be a big barrier. If you can’t medically qualify for a traditionally underwritten life insurance policy, your maximum life insurance coverage available to you will be whatever you can purchase on a guaranteed issue basis, or as part of a survivorship plan. Just because you have a reason to qualify doesn’t mean you can buy life insurance in high amounts. If your health is too poor most companies will consider you as a high risk, but there are some companies who offer up to one million dollar no exam life insurance policies that may be better for your needs. No exam policies may be beneficial for those with pre-existing health conditions or those seeking life insurance for morbidly obese. What ever the situation may be, we are here to help you find a policy to fit your needs.
When you’re looking to buy maximum life insurance coverage for yourself, your estate, or business, we can help you not only establish the insurable need, but we can assist you with quotes and companies as well. We’re an independent life insurance agency so we can help you get what your car insurance agent can’t. Give us a call or start a free quote today.