Term Life Insurance Financial Guidelines

UPDATED: Mar 12, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn't influence our content. Our opinions are our own.

How Much Term Life Insurance Can You Buy?

Just like your current health is a big part of life insurance underwriting, so is your financial situation. You must qualify financially for the amount of coverage you are requesting.

These are some factors life insurance companies consider when financially underwriting your application:

  • Reason for the insurance
  • How the amount of coverage was determined
  • The total amount of life insurance you have with all companies
  • Any pending applications with other companies
  • Any life insurance policies to be replaced
  • The total amount of life insurance you intend to keep
  • Reasons for any unusual owner or beneficiary designations

Life insurance companies may require any of the following financial information to justify the amount of coverage they will allow:

  • Annual earned income
  • Annual unearned income from investments
  • Total net worth
  • Amount of coverage your spouse has
  • Business financial documents (usually for business-related coverage)
  • Documentation for any other unique financial circumstances

Your annual income provides the basis for your insurance need. All companies use a multiple of your income to help determine your insurance need. If your request falls outside these guidelines, the company will turn to other financial information to assist in determining the need.

This table represents the average income guidelines. Please note this is not specific to any one company and guidelines do vary.

20 – 40 30x Annual Earned Income
41 – 50 20x Annual Earned Income
51 – 60 15x Annual Earned Income
61 – 69 10x Annual Earned Income
70+ Individual Consideration

 

Spouse Without Earned Income

Life insurance companies will insure spouses with little or no income, as long as the income-earning spouse has coverage. Below are guidelines many life insurance companies use:

  • Will allow up to 100% of the income-earning spouse’s life insurance amount
  • Maximum allowed varies by company, with a range of $500,000 to $1,000,000
  • Companies usually give individual consideration for amounts above $1,000000

Ready to get started?

Your quotes are always free.