What Are the Requirements to Buy $2,000,000 or more of Life Insurance?
How much does it cost?
When applying for such large amounts of coverage, you should be aware of special requirements that will be required of you that may not be required of someone buying a simple $100,000 policy.
… and since these questions are so common, we’ve compiled this extensive guide for you to easily estimate your life insurance cost, and fully comprehend your options for purchasing coverage.
Large Policy Buyers – An Elite Group
You might be surprised to learn that “Not just anyone” can buy a policy for, say, $4 million dollars.
… even if they can afford the premiums.
You must be able to financially justify your need for the amount of coverage you desire.
Purchasing $2,000,000 to $5,000,000 of life insurance coverage is commonly done by individuals with:
- incomes in the $100,000 range or higher
- real estate holdings
- business owners
- protecting family members from future estate tax burden
- or looking to leave a liquid inheritance to an institution or individuals
Affluent individuals may reference our High Net Worth Life Insurance articles here.
If you are in the market for $2,000,000 dollars of life insurance or more, there are some health, lifestyle, and financial requirements that must be met in order to get approved.
Some clients we work with are surprised to learn about the requirements necessary to qualify for more than 2 million dollars of life insurance.
Every life insurance company has different financial, lifestyle, residency and health requirements that must be met to approve a life insurance policy. We will explain these requirements within this article, provide some sample quotes, and explain the application and approval process.
What does an Insurance Company need to know about me before they can approve my policy?
Before approving a life insurance policy, there are generally 4 major components of your health and lifestyle the insurance companies will evaluate.
1. Country of Residency
The first and most important is residency. If you are a US Citizen or a permanent resident, click here to skip to the income requirements.
If you are not a US citizen or resident, you will be asked if you have a financial interest in the United States like family, property, investments, or a job. If not, it will likely be difficult to secure a large amount of life insurance. In order to be approved for life insurance by a United States based company, insurers generally require an applicant reside in the United States at least the majority of the year. If you don’t, you may still qualify for life insurance, but only if all of the following requirements are met.
- You will apply while in the United States and you will be able to complete your exam and all necessary paperwork while in the United States.
- You have some sort of financial interest in the United States. An example of this might be children in college in the U.S., property, or if you work for U.S. based company.
- You have a bank account in the United States. The life insurance companies will not be able to set up withdrawals from a foreign country or address.
To learn more about residency requirements, please call us at 855-247-9555.
2. Current Income and Age
In order to get your life insurance application for $2,000,000 or more of life insurance approved, you will also need to financially qualify. Put simply, life insurance to protect an estate, not create one. Even more simply, you can’t be worth more dead than alive.
When applying for more than $2,000,000 of life insurance, or generally any amount over $100,000, insurance companies will require information pertaining to your income and net-worth. For some of my clients, this comes as a surprise, but no life insurance company will provide a large amount of life insurance unless it financially makes sense. The standard question is, “if you and your income were gone tomorrow, what if is the financial loss to your beneficiary?”
In order to determine the amount of coverage you qualify for, insurance companies use a formula based on gross income and current age. Typically this formula is referred to as an “income multiplier”, multiplying your age by the number of years you are expected to work before reaching full retirement age. This equation is sometimes referred to as your remaining “working years”.
Please keep in mind, every company has its own variation of this formula and some of life insurers tend to be much more lenient. The majority of life insurance companies consider your retirement age as 65 or 70, but a handful of companies can extend your working years to age 75.
An example of this is a recent client I worked with named Stan. Stan is age 57, and needed $3,500,000 of life insurance to protect his family from estate taxes due at his death. Stan works part time as a CPA and makes about $250,000 per year before taxes. The company that Stan originally applied with was only able to offer Stan a maximum amount of $2,000,000 of coverage. This is because they considered his retirement age to be 65. Stan called me and wanted to know what his best options were. I advised him to apply with one of our A+ rated companies which now considers full retirement at age 75, providing him with 18 times his income instead of 8! Stan was approved for up to $4,000,000 of coverage and accepted $3,750,000. Almost TWICE the amount of insurance his “home and auto” specialty insurer (rhymes with Plate Charm) would offer.
Not surprisingly, the younger you are, the larger amount of coverage you can typically apply for, since you have more working years ahead of you. Please keep in mind your income as calculated on pre-taxed income, so when estimating the amount of coverage you can qualify for, use your “gross” income, not your “take-home” pay.
Here is a table that will help you assess the amount of coverage you can qualify for:
|Ages||Maximum Amount of Coverage Available|
|18 – 30||35 times your gross (pre-tax) income|
|31 – 40||35 times your gross (pre-tax) income|
|41 – 50||25 times your gross (pre-tax) income|
|51 – 60||20 times your gross (pre-tax) income|
|61 – 65||15 times your gross (pre-tax) income|
|66 – 75||10 times your gross (pre-tax) income|
|76 – 80||5 times your gross (pre-tax) income|
In some cases, life insurance companies will actually overlook your income. Exceptions can be made for someone with a unique situation. Some examples might include someone with a high net worth, someone seeking insurance to protect an SBA loan, or someone who owns a successful business and needs to purchase key-person coverage. If you are not sure if you can qualify, and what type of documentation would be required, feel free to call us to speak with a licensed JRC agent at (855) 247-9555.
3. Health Insurability
How does your health affect your life insurance rates and approval?
The cost of life insurance is directly correlated with overall health. Small non-vital health issues are typically overlooked and do not impact life insurance rates. Some examples of overlooked issues include medically controlled cholesterol, blood pressure, hypothyroid, or acid reflux. In fact, some carriers will even allow someone to be up to 50 pounds overweight and still qualify for the best rate category, if their blood pressure, cholesteral and blood sugar are within age-recommended range.
If your health concerns are more serious, don’t give up before speaking with us. JRC works with 40+ companies for a reason. Each has unique “underwriting niches”, health areas where they are more liberal than their competitors. It’s the reason there are so many life insurance carriers out there.
These niches include various types of tobacco use, health issues like heart disease, cancer history or diabetes. Some companies will literally charge double that of a competitor, for the exact same underwriting criteria. This is why it is so important to work with an independent agency representing at least 20 insurance companies.
JRC has access to over 40 insurance company guidelines, not 6 or 8 like our largest competitors. In addition, we provide a free service of “re-shopping” your policy once we receive your exam results, making sure we not only quote the best rates, but deliver the best rates you medically qualify for, even if it’s a different insurance company than where we began the process.
Am I Required to Take an Exam to Prove That I Am In Good Health?
To qualify for more than $400,000 of full, medically underwritten life insurance, (not stripped-down accidental death insurance) a free mini-medical exam is required. The exam is paid for by the insurance company and typically takes about 25-30 minutes. To make the exam as convenient as possible for our clients, the nurse will come to your home to complete your exam. They’ll measure height and weight and your blood pressure. The nurse will also collect a urine and blood sample. A mobile EKG or ECG is generally administered when underwriting $1 million or more. The exam results will be mailed to you for your records. Many or our clients forward these to their physician, often eliminating the need for an annual physical, since the tests are more comprehensive than medical insurance pays for these days.
The tables below provide sample monthly rates for $2,000,000 of level coverage for a healthy non-smoking male. The rates are for the “preferred best” risk category and are from an insurance companies rated A- or better by AM Best. For comparison, we’ve provided rates guaranteed until age 90.
|“Preferred Best” Monthly Sample Rates for A Male (04/2015)|
|Age||10 Year Level Term||20 Year Level Term||30 Year Level Term||Level Rates to 90|
*Sample rates above are for a male, non smoker, in excellent health and are not to be considered an offer of insurance. Each individual must apply for coverage individually for personalized rates. Rates are accurate as of 6/19/15 and are subject to change.
Not everyone will qualify for “Preferred Best” rates, which represent the lowest insurable risk of 12 risk categories. If you have health issues like elevated blood sugar or well-managed type II diabetes, you can still for “Standard Risk”rates, which are 4 out of 12 on risk. They represent average risk for a given age group.
Since few of us are “Supermen”, Standard rates may even be available to someone who has been successfully treated for cancer or is 50-75 pounds above “ideal weight”.
This article shows the difference between preferred and standard rates. As you can see it costs about double the best rate. The link above also helps you assess your rate category if you’re not sure what health class you’ll fall into. Better yet, call and speak with one of our agents free pre-qualified risk assessment and insurance quotes comparisons.
With over 40 top-rated companies, we will find the best company for you.
Why Would A Life Insurance Company Decline my Application?
Life insurance companies can reject or deny your life insurance due to your health, lifestyle, residency, or income. Some of the most common reason’s a person’s application are declined are:
- If you collect Social Security for a disability or suffer from mental health issues. Common reasons for declining an application for life insurance, especially over $1,000,000 of coverage include PTSD, major depression or anxiety, suicidal gestures or attempts, schizophrenia and bipolar disorder.
- If you reside in a nursing home or an assisted living facility, no more than $25,000 of coverage is available. The life insurance companies will also limit your coverage to $25,000 if you are confined to a wheelchair. Family members, other than a spouse, cannot buy life insurance for another adult. The applicant must be involved in the process and approve the purchase , though another family member can pay for the coverage and be the beneficiary
- If you receive treatment for any type of mental illness that affects your memory or any memory issues like Dementia, Alzheimer’s, Cognitive Impairment, etc. Family members, other than a spouse, cannot buy life insurance for another adult. The applicant must be involved in the process and approve the purchase, though another family member can pay for the coverage and be the beneficiary.
- If you are currently receiving any type of treatment for cancer, with the exception of basal cell and squamous cell skin cancer. In order to be approved for term life insurance, the insurance companies want to see that your cancer treatments are complete and at least a year has passed since your last treatment. The life insurance companies will not approved an underwritten policy until they see that your doctor has given you a “Clean Bill of Health”. Skin cancers are an exception as long as they have been removed with clean margins.
- Diagnosis of a terminal illness. Life insurance companies will review your medical records when you apply to make sure you that you have not been diagnosed with any form terminal illness. I had a client apply the day after they left the ER for chest pains, the life insurance company promptly denied the application within 2 weeks.
- Ongoing or current or treatments for kidney disease including dialysis, chronic kidney disease or kidney failure and liver diseases like Cirrhosis will also cause your application to be denied. In some situations if your viral count is very low, Hepatitis C may be insurable.
- Any diagnosis of any form of Congestive Heart Failure, heart transplant, Implanted Cardiac Defibrillator, or Angina will cause your application to be denied.
- Any type of serious respiratory conditions, especially for current smokers. Common respiratory conditions that cause an application to be declined include chronic bronchitis, COPD, and Emphysema.
As long as you are in reasonably good health, you should be eligible to purchase life insurance. However; there are some risks, not related to your health, which will cause the life insurance companies to decline your application. If you partake in any dangerous sports, or if you have a hazardous job that you think may prevent you from being able qualify for fully underwritten life insurance.
Call us to see if you qualify at 855-247-9555.
If I am in excellent health, are there any other factors that would prevent me from being approved for life insurance?
Traveling to a “Dangerous” Destination?
When you apply for life insurance, the company will ask about your future and past travel plans. The primary reason for this is that; some countries are extremely dangerous to travel to, and life insurance companies do not want to take on the risk.
If you plan to travel or if you have recently traveled to locations listed on the State Department travel warning list, you may have a problem being approved for life insurance. Insurance companies tend to be less lenient when approving life insurance for someone who frequently travels, or plans to travel to, countries with documented political instability or countries that lack reasonable medical care. Currently some of the locations listed on the State Department list include; North Korea, Iran, parts of West Africa affected by Ebola outbreaks, conflict areas including parts of Ukraine, and conflict areas in Israel including the West Bank and the Gaza Strip. The life insurance companies will consider your last 2 years of travel history when approving your life insurance application.
The good news is that some states have passed regulations that prevent the life insurance companies from looking into your travel plans or history. In the following states, most insurance carriers do not consider past or future travel; CA, CO, CT, FL, GA, IL, MA, MO, NJ, OK, TN, WA. In LA, MD, and NY, the life insurance carriers can consider your future travel plans, but most will overlook your past travel plans. If you are not sure what company to apply with due to your travels, feel free to call and we can find the best option for you.
Why Does Bankruptcy Affect My Eligibility for Life Insurance?
Most of the clients I work with wonder why the life insurance companies want to know about their history of bankruptcy, if applicable. I have always been advised by the insurance companies that their main concern when insuring someone with a pending bankruptcy is whether or not the applicant is suffering from any grief due to the bankruptcy and bankruptcy proceedings. When applicants are filing for bankruptcy, the life insurance companies have noticed increased incidences of suicidal gestures and attempts. Because of these statistics, there may be a waiting period before you can purchase life insurance.
Chapter 7 and Chapter 13 bankruptcies are the most common. A chapter 7 bankruptcy is usually discharged and all debt is forgiven. If you have filed for Chapter 7 Bankruptcy, you will be eligible for life insurance as soon as the Bankruptcy is discharged.
Chapter 13 bankruptcies require a repayment plan that is implemented by the courts. Once your Chapter 13 bankruptcy is settled and you are making payments, you may be eligible for life insurance. Typically the life insurance companies like to see at least 12 months of payments, but 18 months or more is preferable.
If you are currently making payments on a Chapter 13 bankruptcy, or if your bankruptcy was not a Chapter 7 or 13, please call to speak with one of our agents to see if you are eligible for coverage.
If your job is considered to be dangerous or hazardous by the insurance companies, it can cause your life insurance application to be declined or it can cause an increase in your premiums. Some of the occupations that the life insurance companies tend to try to avoid include; High-rise construction laborers, loggers, Swat Team members, structural workers, oil rig workers, and pilots of experimental aircraft.
A job can also be considered dangerous due to its location. If your job requires you to travel to politically sensitive countries, this may prevent you from being insured. I recently worked with a pastor who traveled to “dangerous” countries for missionary work. Like Canadian Reverend Hyeon Soo Lim, who was recently detained in North Korea, my client also travels to countries that are politically sensitive to outside religious beliefs.
Luckily, I was able to offer this client a policy. Even though he was in excellent health, he was charged a more expensive rate due to the risk associated with his travel to “higher-risk” countries. If you are unsure as to whether or not your occupation is considered hazardous, feel free to call and speak with one of our experts who will provide you with the best options available to you.
Life insurance companies will also ask applicants for information about their hobbies, particularly and hobbies that are considered to be dangerous. In fact, some hobbies will actually prevent you from getting your life insurance application approved. Some of the hobbies that a life insurance company will cause your application to be denied include; bungee jumping, salvage or wreck scuba diving, mountain or rock climbing, skydiving, and motorcycle racing.
If you scuba-dived once on your Honey Moon, and you no longer plan to continue scuba diving, the insurance company will probably overlook your history of scuba diving. If you still scuba dive and you dive alone, dive in caves, or engage in wreck or salvage diving, the life insurance companies will most likely decline your application. In some situations the life insurance companies may approve your application with a “flat extra”. This is an additional fee that is charged on-top of the regular cost of the life insurance, and these fees are usually assessed to individuals with an above average risk.
If you indicate dangerous or hazardous hobbies on your insurance application, the insurance companies will ask you additional details on an avocation questionnaire. This questionnaire is used to determine the level of risk your hobby presents. After reviewing your answers, your application can either be declined, approved, or approved at a more expensive rate. Some companies are more lenient with some hobbies than others. For example, one company will charge a higher rate if you scuba dive deeper than 50 feet while another company allows up to 100 feet. The same is true with pilots, rock climbers, etc.
Depending on your situation, it may also be advisable to sign an exclusion for your hobby. A very common exclusion is an aviation exclusion. Typically private pilots who no longer fly, or private pilots who have separate life insurance that covers them only while they are flying, elect to sign an aviation exclusion. Basically this exclusion states that your life insurance will cover any form of death unless you pass away while flying your own airplane. If you sign an aviation exclusion, your policy will still protect you if you pass away in an airplane accident, as long as you are not the pilot of the airplane.
In most situations however, aviation exclusions are not common especially for commercial pilots on regularly scheduled flights or instrument-rated private pilots. Life insurance companies are typically very lenient with someone regularly flies an airplane as long as the aircraft is not experimental or ultra-lite.
Driving records usually do not have an impact on your life insurance, but if you have multiple infractions or a DUI/DWI, it can present a challenge when getting approved. Some life insurance companies are much more lenient with driving records than others but, as a general rule of thumb, a DUI/DWI within the last 2 years is an automatic decline with 95% of life insurance companies. Some of the companies we work with will approve someone with a DUI more than 12 months ago, but the rates for the policy are going to be approximately 50% more than someone in average health. Currently, we do not work with any companies that will approve someone who has been charged with a DUI/DWI within the 12 months. Generally, if you have been convicted of 2 DUI’s within the last 5 years, or more than 3 DUI’s in your lifetime, fully underwritten insurance is not available to you.
If you have multiple moving violations, you may also be approved at a more expensive rate class. Typically, most companies will allow 3-5 tickets within the last 3 years before they charge higher rate, but if you have multiple tickets or charges like reckless driving on your driving record within the last 3-5 years, you could see a higher premium. Each company has its own scale for what they consider to be an “at-risk” driver, if you are not sure how many moving violations you have had in the last year, it may help to obtain a copy of your driving records prior to applying if you believe you have more than 5 moving violations in the last 3 years. If your driving record prevents you from being able to obtain auto insurance, it may be impossible to find life insurance.
Last year, our agency was able to help an executive, Fred, who traveled hundreds of miles each week for his job. Fred had so many tickets that he no longer had a driver’s license as it had been revoked by the courts. Luckily, he found us online after being declined by a few local agents. When we submitted Fred’s application, the main concern the underwriter had was whether or not our client was still driving on a revoked license. Our client submitted a cover letter explain that he no longer drives and has a driver he used when he needs to travel. After reviewing his cover letter, the underwriter was able to approve the policy.
Life insurance companies will review your criminal records prior to approving you for life insurance.
Unfortunately; if you are currently on probation, parole, we will not be able to offer you fully-underwritten life insurance, the insurance companies will review your criminal records and decline your application. Typically in this situation, the maximum amount of coverage available to you is $25,000.
In general, misdemeanors are not much of a concern to life insurance companies, but felonies are looked at much more harshly. In general, if you have been charged with a felony in the last 5 years, you will not be eligible for term life insurance. After 5 years, you may be eligible for term insurance, but if your charges include any type of fraud or if you were convicted of a violent crime, your application will be denied for at least 10 years after you complete all sentencing and probation. The maximum amount of coverage we can offer someone in this situation is $25,000.
A life insurance policy for $2,000,000 to $5,000,000 of coverage if a huge financial liability for a life insurance company and they will not offer this much coverage to someone who may have to serve time. Just like some travel destinations, life insurance companies consider jail to be a “very dangerous” place.
Active Military and Armed Forces
If you are an active member of the military or if you are a member of the armed forces, you may have a very difficult time securing life insurance, especially if you are scheduled for deployment. Unfortunately, the vast majority of life insurance companies will flat out decline any life insurance application for anyone that is active in any branch of the Armed Forces, but we can help.
With over 40 top-rated companies under our belt, we are able to offer competitive rates for active members of the military and the armed forces, even if you are scheduled for deployment. Do not delay though, life insurance can take up to two months to get approved, and you must sign your policy while in the United States for it to be active. Our advice, is always to start the process sooner than later especially if you have a need for coverage. In addition, you will want to make sure your policy is set up for automatic drafts so you do not lose coverage if you are deployed abroad.
Call to Speak With An Expert
Not sure where to begin? Call us today and one of our expert agents will shop over 40 top-rated life insurance companies to find the lowest priced policy available to you in the Nation. Our agents do not have quotas, we offer a no-pressure, consultative approach to life insurance. Our clients say it the best, please click here to read our client testimonials.
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