When I was a rookie agent, I used to think that $3 Million, $4 million or $5 Million of term life insurance was a lot of coverage.
Over my 10+ year career, however, I’ve learned there are multiple valid reasons a prudent individual might need that level of coverage, including:
- estate tax or liquidity needs
- leaving an inheritance
- key person or buy-sell agreements in business
- and many other circumstances
But be careful!
… a lot of agents out there would prefer to sell you a policy that’s best for their pocketbook, instead of what’s best for your needs.
That’s why I’m going to guide you on the type of policy you need, what to do if you have a health condition or take medication, and how you can find the best rates on $3 Million to $5 Million of life insurance.
Table of Contents:
Why Purchase $3 Million to $5 Million of Life Insurance?
The affluent aren’t buying these policies because they worry about becoming destitute.
The reason they are buying large policies is that they understand that life insurance is one of the best financial means available to “leverage their dollars.”
Let’s take a look at one possible scenario:
Dave and Jennifer reviewed the cost of 5 million dollar life insurance and have selected to purchase a $5,000,000 second-to-die permanent life insurance policy which will cost $107,264 annually for a premium.
Jennifer, who is 72 years old, will have the higher life expectancy as the Social Security Actuarial Table predicts she will survive to be 87 years of age.
If she lives to be 87 life expectancy, then the couple would have paid a total of $1,608,960 and will have a guaranteed return of $5,000,000 which would be payable to their estate!
This calculates into a substantial after-tax Return On Investment equivalent to 13.2% per year!
This same approach can be used for those who are looking for either 3 million of life insurance or 4 million of life insurance.
$3,000,000, $4,000,000 and $5,000,000 20 Year Term Life Insurance Quotes
The quotes below assume a MALE, non-tobacco user in excellent health. Please note that use of medications or health history may or may not increase the premium.
| AGE | $3,000,000 | $4,000,000 | $5,000,000 |
|---|---|---|---|
| 30 years old | $99.00 | $131.00 | $162.00 |
| 40 years old | $150.00 | $198.00 | $246.00 |
| 50 years old | $431.00 | $572.00 | $714.00 |
| 60 years old | $1,231.00 | $1,640.00 | $2,059.00 |
| 70 years old | $4,654.00 | $6,205.00 | $7,755.00 |
| 80 years old | $14,138.00 | $18,849.00 | $23,560.00 |
*Please note all quotes above are MONTHLY premiums for a MALE, 20 year term. The two exceptions for $4,000,000 of life insurance and $5,000,000 of life insurance is for the 80 year old, which is a guaranteed universal life quote, which had to be quoted since no companies offer 20 year term past age 75.
What Are The Financial Requirements?
Another issue you will come across is if you can qualify financially.
Even if you can afford the monthly premiums you still have to actually qualify to be approved for the coverage.
As with anything dealing with life insurance, the younger you are, the more coverage you can qualify for and apply for.
Your annual income as calculated on a pre-taxed basis, before any taxes are taken out.
When trying to determine the amount of coverage you can qualify for, use your gross income, not your take-home or net pay.
Life Insurance Age & Income Requirements
Here is a table that will help you assess the amount of coverage you can qualify for:
| Ages | Maximum Amount Of Coverage |
|---|---|
| 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 |
Can You Qualify With Health Issues?
What about health issues where you are taking medication to control cholesterol, diabetes or have high blood pressure?
In most instances, you will be covered so long as these medical conditions are under control.
It is even possible you may still be eligible for a “Preferred” rating if you are otherwise healthy.
Even a person who is over the age of 55 and looking for 3 million of life insurance, 4 million of life insurance or even 5 million of life insurance and has been recently diagnosed with diabetes and has a low a1c can qualify for a “Standard” rating.
There are other health and lifestyle reasons why you might not get a preferred rate such as if you recently had a heart attack or have recently recovered from cancer, or if you engage in hazardous occupations, hobbies, and other rating factors.
That’s why we always recommend that you discuss your particular situation and call us for a personalized quote.
Benefits of Buying A Multi-Million Dollar Life Insurance Policy
Yes! You can actually see a huge financial benefit by buying a large policy including:
Take our case from above, Dave and Jennifer, who pay over $107,000 per year:
- A life insurance policy will provide money that is immediately available to the estate to cover estate taxes
- You can also remove some or all of the death benefits from the estate, so it is not subject to estate taxes
- And, by paying the estimated $107K in premiums on annually, the effect would be to lower the value of the estate which will also reduce the tax liability of the estate.
- It preserves their estate.
- The effect will also be to enhance the overall estate value.
Let’s also look at it from another perspective.
Suppose you were 65 and bought a $3,000,000 policy providing you were affluent enough to afford the premium.
It would cost you a premium of approximately $27,300 per year.
Were you to survive more than 10 years, it would have cost a total premium of $274,000, but your beneficiaries would receive $3,000,000.
Were you to invest this money in another investment vehicle; you would need to earn an annual rate of return of 42.09%!
What if you wanted to give money to a charity?
Can it be advantageous to buy a larger policy to use some of the proceeds which you donate to your favorite charity which you have named as a beneficiary?
Donating gifts of life insurance to charity instead of using other assets has several significant benefits including:
- Life insurance can avoid probate and avoid any difficulties in settling the estate.
- More money can be given to the charity which allows them extra funds for other projects.
- Large donations attract more publicity which can garner more donors.
- Your estate will get a tax deduction.
What Type of Policy is Best for $3 Million, $4 Million, or $5 Million in Coverage?
Term Life Insurance
If you’re looking for life insurance for a set period of time, such as 10, 20, or 30 years, I suggest you buy term life insurance.
Term is the least expensive type of policy, but be careful. It’s premiums usually increase at the end of the term you select.
For example, if you pay $100 per month for a 15 year term, beginning on day 1 of year 16, your premiums will likely skyrocket 5 to 10 times as high as they were during the initial, level term.
Whole Life Insurance
For estate planning, charitable, or permanent needs, many of you will need a policy that provides lifetime coverage.
Perhaps you’ve heard of whole life insurance…
…We don’t recommend it:
It’s overpriced, and you can typically get the same coverage for 30% to 50% cheaper using guaranteed universal life.
You can get quotes for guaranteed universal life using our form on the right or below.
This policy is similar to whole life insurance but without the cash value accumulation.
So you pay the lowest amount possible (only the cost of insurance) to provide guaranteed coverage for life, whereas in whole life, you pay extra premiums that build up as cash value.
We primarily sell guaranteed universal life and term life insurance at 3 Million of life insurance, 4 Million of life insurance and 5 Million of life insurance dollars levels, since it is so much less expensive than whole life, but if you want to see a quote for whole life, we’re happy to provide this if you call us at 888-603-2876
*While we make every effort to keep our site updated, please be aware that "timely" information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Huntley Wealth & Insurance Services and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.
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