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Most people don’t need to buy as much life insurance as they can get. Term life insurance coverage is designed primarily to replace a person’s income if they pass away unexpectedly.

You don’t want to die and leave your family the burden of paying expenses without the benefit of your income. This is why term life insurance is seen as “income replacement”. Life insurance can also help pay off large expenses, like a mortgage and student loans.

However, some individuals do need large policies to cover other financial needs, like keeping a business alive, or cementing a legacy through a charitable gift, or helping to divide up a large estate equally among their family and offset estate taxes. This is when it’s important to understand your life insurance limits.

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» Learn more: How Much Life Insurance Do I Need?

Life insurance is often quite easy to purchase. But individuals looking for larger-than-average face amounts on their policies will run up against some new hurdles when it comes time for their policy to be underwritten.

When an individual is asking for 30 times their annual income as the face amount of a policy, the insurance carrier will often come back with one simple question: “Why do you need all of this money?”

Financial Justification

Insurance carriers require a financial justification for large policies because life insurance is designed to replace wealth, not increase it. Just like a car insurance policy can only cover the value of a car and no more, a life insurance policy can only cover up to the maximum value of the person being covered.

A person’s Insurability Limit is the limit to the amount of total insurance that can be inforce on a person at any given time across all of policies that insure their life.

For example, if a person’s insurability limit was at $1 million, and they already had an inforce policy for $750,000, another carrier would not issue a $500,000 policy on top of the existing coverage without changes in coverage or surrender of that existing policy.

» Calculate: Life insurance needs calculator

While there’s a little more wiggle room in the price of a human life than the price of a car, there are still limits on how much financial compensation you can arrange with a life insurance policy. A carrier takes into account your current income, net worth, and any other assets or income streams you have access to in order to determine the maximum amount of coverage they’re willing to offer.

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Rule of Thumb

For individuals who are married or have dependent children, the table below provides general financial underwriting guidelines some life insurance carriers use.

For example, if you’re a 30-year-old making $50,000 annually, your maximum insurability limit is around $1.75 million.

AgesIncomeFactorAmount of Insurance Allowed
To 40$x 35= $
41-50$x 25= $
51-60$x 20= $
61-70$x 10= $
71-80$x 5= $

» Learn more: Life Insurance: Do You Need Ten Times Your Salary?

For retired individuals, insurance carriers are more hesitant to offer policies for the purpose of income replacement. The carrier’s underwriters will review requests for large amounts of coverage on a case-by-case basis. They will review a person’s net worth, day-to-day expenses, and estate tax considerations.

Insurability Limits for Stay-at-Home Parents

Even people that don’t have a source of income, like stay-at-home mom or dad, can get life insurance since their work at home takes the place of a dizzying number of costs.

Insurance carriers each have individual rules regarding the amount of coverage they can offer to non-working parents. This ranges from half of their spouse’s coverage limit all the way up to a matching policy capped at around $3 million.

If you’re a stay-at-home parent, having one of Quotacy’s independent agents help you shop around for a policy can help you get the coverage you deserve.

» Compare: Term life insurance quotes

As you can probably guess, not many people really need to reach the limits of their insurability, and the price of a maxed-out policy is often cost-prohibitive. For most people, a better question to ask is “how much life insurance do I need?”

Assessing Your Insurance Needs

When determining how much life insurance to buy, we recommend using a 2-step process to determine how much coverage you need.

First, put enough into your policy to replace your current income for the amount of time it will take for your family to be back on firm financial ground.

Second, add additional coverage for any additional debts your family will need to pay off, like your mortgage or a child’s college tuition.

Our online life insurance needs calculator lets you play with your monthly income and debt to be repaid to help you get an idea of how much coverage you should apply for, and you can easily get accurate quotes for your recommended policy on our site as well, all without giving us your contact information.

If you decide to apply for coverage through us, but still aren’t sure about your face amount, you can always ask your Quotacy agent for advice. Your agent will be able to give you some expert suggestions based on your unique financial situation.

» Compare: Term life insurance quotes

About the writer

Headshot of Eric Lindholm, a life insurance writer, for Quotacy, Inc. New Year's Resolution

Eric Lindholm

Communications Coordinator

Eric started in Quotacy's sales department, but moved to marketing after helping hundreds of people through their life insurance buying journey. Aside from writing about buying life insurance, he also edits Quotacy's monthly newsletter, runs our YouTube channel and produces Real Life, our podcast. Eric lives in Minneapolis, where his coworkers are trying to convince him to take his humor into the spotlight. Connect with him on LinkedIn.