There is a misconception that anyone can purchase any amount of life insurance they’d like.
If you’re over age 70 and you want more than $25,000 of life insurance, you may have a hard time finding a company with good rates that will agree to offer it.
Getting small amounts of life insurance up to about $25,000 to help pay for final expenses is not usually a problem for most people, and little or no justification is usually required for such low amounts.
To qualify for more than $25,000, you’ll need to indicate why the higher amount is needed.
According to life insurance companies, life insurance is not to be used for wealth creation. The insurance companies will never, knowingly, allow anyone to profit from someone else’s death.
The insurance companies always require justification on the need for the amount of life insurance you’ll want to purchase, and there must be an “insurable interest” between the insured and the beneficiary.
For example, if I want to buy a $500,000 policy on my uncle who is 72 because this could be an excellent investment for me, it’s highly unlikely I’d be able to convince any insurance company to offer the coverage. I’m going to have to explain to the insurance company why the $500,000 is required and how my uncle’s death would cause me a financial burden that requires that amount of life insurance. If the need cannot be explained, the insurance company will not agree to offer any coverage.
The older you get, the more strict the insurance companies are regarding the maximum amount of life insurance they’ll allow you to purchase.
They’ll base the maximum amount they’ll offer on a multiple of the person to be insured’s income. It doesn’t matter who is paying for the policy (son, daughter, etc.), it is the income of the person who’s going to be insured that matters.
Income can be all income received, either from social security, pension income, and/or current employment.
Below is the approximate norm for maximum amount of life insurance that insurance companies offer based on multiple of the person to be insured’s annual income:
56-60 15 x’s
61-70 10 x’s
71-79 5 x’s
80+ Individual Consideration