Are there limits to how much life insurance I can buy? Can I buy a million dollar policy?
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Asked June 7, 2015
In the world of finance, a life insurance policy worth a million dollars is relatively small potatoes. A simple final expense policy may easily value as much as $100,000, and a permanent life policy for a million dollars is common in the industry. The insurer will sell you a policy for whatever amount you deem necessary, but your rates will increase dramatically as the policy value goes up.
For a healthy nonsmoking female in her 40's a policy for $200,000 might run somewhere around $40 per month. For that same woman to purchase a policy worth a cool million, the premiums may go up to $150 a month or even more. The actual premiums will be based on other factors, but the face value of the policy is going to be the primary factor which determines your base rates.
If you think about it, a million dollar life insurance policy is not that much. For example, if you had 3 kids that you wanted to put aside college tuition for in case you pass away, the average cost of a college education is around $150,000, and may cost more than $250,000 for a high level degree. At $750,000 for college education, a million dollar policy might only pay for that, pay off the family home, and leave a small amount for bills and other uses for your survivors. In this example, you may need a higher amount of life insurance, or consider rethinking how you want to put your children through college to cut down on how the policy will be used.
Insurance companies will need to establish an insurable value for your policy. However, this value does not represent your current financial value; it represents what your finances can be expected to do over the course of the policy. Because of this, buying the policy as early in life as possible will make it possible to by a larger policy for the least amount of personal cost.
There is not a maximum amount for a permanent life insurance policy. If you can show the insurance company that you are worth the risk protection and can afford to pay the premiums, the insurer will be happy to sell you any size policy you want. Even if you suffer from specific health conditions, you can purchase a large policy if you are willing to go through a high risk insurance company and pay even higher premiums than would be typical for a healthy person.
Answered June 25, 2015 by Anonymous