A life insurance coverage of one million dollars may appear to be excessive. If it seems excessive, I can only imagine what a $3 to $4 million coverage would be like. But the truth is that such rules are in place for a purpose. High-income earners or those wishing to preserve their estate may require such hefty insurance coverage in certain circumstances.
So, who would require a three-million-dollar policy, and how much do you require? Allow me to give you an example…
- How much life insurance do you require?
- Why Would You Need a $3 Million Term Life Insurance Policy?
- Underwriting a term life insurance policy for $3 million.
- The financial criteria for a $3 million insurance are as follows:
- Using Your $3 Million Insurance Policy as a Ladder
- Is it possible to qualify if you have specific health issues?
- Case Study of a High-Risk Condition
- Which insurance providers are the best for a $3 million policy?
How much life insurance do you require?
According to most financial experts, you should get life insurance coverage equal to 10 to 15 times your annual salary. So, if a high-income person made $200,000 per year for 15 years, the required coverage would be $3 million dollars. Even someone earning $250,000 would have life insurance worth $2.5 million to $3 million.
If you’re not sure how much life insurance you need and would rather base it on your overall household needs, you may use a life insurance calculator to acquire a more precise figure. In any case, the fundamental purpose of getting life insurance is to safeguard your family for decades to come.
You may just need 10-year term insurance, but if you’re younger, I’d recommend at least a 20-year term, preferably a 30-year term if the cost isn’t excessive. I’ll also add that having $3 million in insurance is nothing to sneeze at. In most cases, purchasing a term life insurance coverage makes the greatest financial sense, allowing you to put more money toward accumulating wealth.
Why Would You Need a $3 Million Term Life Insurance Policy?
We’ve previously discussed the value of asset protection and why you would need such a substantial life insurance policy for yourself. Here are a few more reasons why someone would wish to explore such a policy:
- Coverage for Final Expenses – Final expenses are exactly what they sound like. This is to cover burial costs, hospital bills, and perhaps long-term care expenditures if insurance coverage is not available. While funeral prices normally vary from $20k to $30k, they aren’t likely to rise much in the near future. Medical and long-term care expenditures, on the other hand, are absolutely unpredictable in the future.
- Extra expenditure coverage – This is uncharted territory. Would your family be able to remain in your existing house, or will they choose to relocate to be closer to relatives? There are a range of fees to consider if you have children, ranging from college tuition to help them pay for a wedding.
With so many unknowns, it’s critical to have a meaningful discussion about everything that may or should be taken into account. And if you’re not sure you’ll be able to unearth all of the crucial variables, a financial advisor or independent life insurance agent can assist you.
Underwriting a term life insurance policy for $3 million.
Obtaining a $3 million-dollar coverage follows the same underwriting process as any other form of the insurance policy. When I purchased my $2.5 million coverage, I planned a paramedic checkup with a nurse who would come to my office. This is a basic assessment in which your height, weight, blood pressure, and any other pre-existing problems are collected. They also extract a tiny sample of blood and urine, which is subsequently sent to a lab for additional testing.
The entire procedure is rather painless, and they are more than eager to accommodate your schedule.
The financial criteria for a $3 million insurance are as follows:
You could believe that if you’re prepared to pay for a $3 million coverage, a life insurance company will gladly accept your money. That isn’t the case at all. In fact, it’s the polar opposite. You’ll need to verify your income first. Any life insurance firm that receives an application for a million-dollar policy from someone who barely earns $25,000 per year would be skeptical.
This is when the common-sense rule applies, and it simply does not make sense.
Another thing to keep in mind is that the younger you are, the more likely you are to be accepted for life insurance, even larger plans. We previously highlighted how most financial experts recommend acquiring life insurance coverage of 10x to 15x your annual salary, but most firms have a limited level of coverage based on your age.
Using Your $3 Million Insurance Policy as a Ladder
Laddering (or layering) a life insurance policy is quite similar to the notion of laddering (or stacking) CDs or bonds. The difference is that not locking your money in for a long time helps you save more money. Allow me to explain…
Assume you’re a 35-year-old business executive with three children and a manageable mortgage. You and your wife have talked about it for a long time, and after consulting with a financial specialist, you’ve concluded that $3 million in coverage is the right amount for you.
You may have the financial means to pay for a $3 million insurance with a 30-year term, but you also know that your house should be paid off in 20 years, so are you sure you need the 30-year policy? In this case, you may elect to buy a $2 million 30-year term insurance and a second million-dollar 20-year term policy at the same time.
This way, you’ll be covered for $3 million until your house is paid off and your children have graduated from high school. Once that is completed, you will have coverage for another ten years and will no longer be required to pay for the second insurance.
Is it possible to qualify if you have specific health issues?
There are various elements that influence the cost of life insurance and whether or not you are accepted. Another important consideration is the life insurance firm. What most people don’t realize is that if two persons with identical health problems applied to two different insurance companies, the cost and likelihood of approval may be drastically different.
The preceding assumes that both people are in good health. What happens if there are worries about one’s health? Or if pre-existing illnesses like prostate cancer or heart disease run in the family?
These high-risk conditions will have a significant influence on how much you have to pay and whether or not the insurance provider will cover you.
Case Study of a High-Risk Condition
Years ago, I was dealing with a man in his mid-70s who had undergone open-heart surgery four years prior. He’d been following his doctor’s instructions to maintain a healthy weight, eat well, exercise regularly, and take all of his prescription medications.
He felt confident enough in his ability to get reasonable life insurance when enough time had elapsed. However, he began the procedure and became irritated when he was repeatedly refused. He was on the verge of giving up, but after calling a couple more carriers, he was eventually able to obtain the coverage he need.
The moral of the story is to never give up. When looking for life insurance, keep “your why” in mind. If it’s for your family, go to whatever length to obtain coverage. It’s also a good idea to get counsel from a certified independent life insurance agent who has worked with clients with high-risk illnesses before. Age, gender, health history, family health history, employment, hobbies, drinking, smoking, and weight are all characteristics that will impact your ability to obtain life insurance coverage.
Which insurance providers are the best for a $3 million policy?
The simple answer is the life insurance company that is prepared to provide you with coverage at the lowest possible cost. That may sound ridiculous, yet it is completely accurate. As a starting point, read over our list of the best life insurance companies.