If you’re looking to see how much life insurance coverage you’re eligible for than you came to the right place.
Below, I’ll go over the life insurance financial underwriting guidelines from a leading U.S. life insurance company to illustrate how much life insurance coverage you can have in total.
Table of Contents
Why Life Insurance Companies Have Coverage Limits
Life insurance companies have financial underwriting guidelines, primarily based on reinsurance companies (insurance companies that insure the insurance companies) to make sure their policyholders are adequately covered.
The majority of life insurance companies in America will allow 5 times to 30 times your annual income (depending on your current age) in total life insurance to replace income that would have been earned in the event of a premature death.
Let’s take a look at the numbers!
Maximum Life Insurance Coverage Limits for Family Protection
Below are the financial underwriting guidelines from a top U.S. life insurance company for the maximum coverage they allow for family and income protection. As you can see, life insurance companies allow for a greater multiple of annual income the younger you are since theoretically there are more working years ahead that need to be insured.
Take a look at the maximum life insurance reference guide below that shows the total life insurance coverage limits allowed by annual income and age.
Maximum Life Insurance Limits for A Stay-At-Home Spouse (No Income)
The guidelines below show the maximum amount of life insurance coverage a non-income earning spouse can carry.
Maximum Life Insurance Limits for A Spouse (Lesser Income)
The guidelines below show the total amount of life insurance coverage available for a working spouse with a lesser income than their significant other.
Life Insurance Coverage Limits for Personal Debts
Aside from income protection, one of the main reasons people get life insurance to cover outstanding debts. Common debts include:
- Mortgage
- Student loans
- Auto loans
- Credit card
- Medical
- Home equity line of credit
As you can see in the table below, life insurance companies use the same formula used for income protection to calculate the maximum limit of life insurance coverage to cover outstanding debts.
Life Insurance Limits for Estate Planning
The table below shows the the maximum amount of life insurance allowed for estate planning.
Life Insurance Limits for Charitable Giving
The table below shows the underwriting guidelines for charitable giving (and charitable bequests) life insurance coverage.
Maximum Life Insurance Coverage Limits for A High-Net Worth Individual
Life insurance companies will typically use “individual consideration” for high-net-worth individuals and couples for determining the maximum coverage limits.
This means the underwriter will look at the annual gross income as well as possible estate tax obligations. Many times high-net-worth individuals that may not meet the desired coverage amount limits based solely on their income may still qualify based on their net-worth. An experienced broker can do anonymous quick quotes with many top carriers to see who will offer the desired coverage.
Total Amount of Life Insurance Available for Business Purposes
Below is a sample life insurance underwriting guideline table for business from one of the largest life insurance companies in the nation.
Debt
Key Person
Buy Sell
Maximum Life Insurance Coverage Allowed by Age & Income Reference Guide
Age 40 and under:
$25k a year = $750k
$30k a year = $900k
$35k a year = $1 million
$50k a year = $1.5 million
$75k a year = $2.25 million
$100k a year = $3 million
$150k a year = $4.5 million
$200k a year = $6 million
$250k a year = $7.5 million
$300k a year = $9 million
$500k a year = $15 million
$1 million a year = $30 million
Ages 41 to 50:
$25k a year = $500k
$30k a year = $600k
$35k a year = $700k
$50k a year = $1 million
$75k a year = $1.5 million
$100k a year = $2 million
$150k a year = $3 million
$200k a year = $4 million
$250k a year = $5 million
$300k a year = $6 million
$500k a year = $15 million
$1 million a year = $20 million
Ages 51 to 60:
$25k a year = $375k
$30k a year = $450k
$35k a year = $525k
$50k a year = $750k
$75k a year = $1.125 million
$100k a year = $1.5 million
$150k a year = $2.25 million
$200k a year = $3 million
$250k a year = $3.75 million
$300k a year = $4.5 million
$500k a year = $7.5 million
$1 million a year = $15 million
Ages 61 to 70:
$25k a year = $250k
$30k a year = $300k
$35k a year = $350k
$50k a year = $500k
$75k a year = $750k
$100k a year = $1 million
$150k a year = $1.5 million
$200k a year = $2 million
$250k a year = $2.5 million
$300k a year = $3 million
$500k a year = $5 million
$1 million a year = $10 million
Ages 71 to 80:
$25k a year = $125k
$30k a year = $150k
$35k a year = $175k
$50k a year = $250k
$75k a year = $375k
$100k a year = $500k
$150k a year = $750k
$200k a year = $1 million
$250k a year = $1.25 million
$300k a year = $1.5 million
$500k a year = $2.5 million
$1 million a year = $5 million
*Numbers include total life insurance from all companies, excluding basic group coverage from an employer.
*Each company has their own financial underwriting guidelines on the total amount of life insurance they allow. The numbers above are from the guidelines of a leading U.S. life insurance company. Contact us with any questions.
*Estate planning high-net-worth life insurance underwriting has different guidelines. See sections above on estate taxes and high-net-worth individuals.
How Much Life Insurance Am I Eligible for – Frequently Asked Questions
Q: Do life insurance companies include my group life insurance from my employer when calculating the maximum I can carry?
A: No. Group life insurance is typically not portable if you leave your job and when it is portable the rates are usually exorbitant. Therefore, most life insurance companies do not include basic group coverage when determining the total amount of life you can carry.
Q: Can I get life insurance from multiple companies?
A: Yes. You can apply and have life insurance policies from as many companies as you like. However, each company is going to have their multiple of income guidelines to make sure you are not overinsured.
Q: How much life insurance should I carry?
A: Financial experts such as Dave Ramsey and Suze Orman typically recommend to carry at least 7x to 10x your annual income in total life insurance coverage.
This is a rule of thumb and I recommend that your everyone do a quick needs analysis to determine the proper amount of coverage you need to protect your family.
Q: How much life insurance can I get if I have an H1B visa?
A: It will depend on the issuance company and the country of origin. However, many top companies allow the same amount of coverage as a U.S. citizen.
Q: What if my income changes?
A: If you have an increase in salary, then you can always apply for the additional life insurance at that time (based on your age and health) to protect the new obligations and income. If you have a decrease in salary it won’t affect the current policy since it is locked in once the policy is activated.
Q: What is a life insurance multiple of income table?
A: A life insurance multiple of income table shows the proposed insureds age and gross annual income multiple that an applicant is eligible for in total life insurance.
While people have different financial needs for life insurance, the multiple of income guidelines provide a formula to show the maximum amount of life insurance one can carry to prevent them from being over insured.
Wrap Up
The maximum amount of life insurance an applicant is eligible for from all policies depends on their age, income and purpose for the coverage. This is called financial underwriting.
Each life insurance has their specific guidelines. However, the maximums typically range from five to thirty times annual gross income depending on the age when applying.
This maximum limit is in place to protect you and the insurance company from being overinsured.
Since each life insurance company has their own underwriting guidelines including financial underwriting, it’s imperative to compare rates from multiple life insurers to ensure you receive the best rates and qualify for the desired life insurance policy amount.
*The numbers and tables used in the post above are from one of the largest life insurance companies in the United States. Each company has their own maximum life insurance limits and financial underwriting guidelines. This post is for informational purposes only and not a offer or guarantee of coverage.
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