If you intend to buy a 10-million-dollar life insurance policy, in addition to being healthy, you’ll need to demonstrate your financial need for such amount. After all, the purpose of life insurance is to safeguard a client’s wealth, not build it.

Our needs and wants are constantly clashing with each other. Do I need this new phone or fast car? Well, if you have the funds, you don’t have to have the need. Your desire is sufficient.

Not valid when you buy 10-million-dollar life insurance. Affordability or being healthy aren’t the only questions. You’ll also need to show a compelling requirement and purpose for such protection.

In this post, I will go over who can qualify for such a comprehensive policy and the rates.

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Get Ready to Answer In-Depth Questions

  1. Is there an insurable interest?
  2. Is there a purpose for such an amount?
  3. What is the economic loss? How was it determined?
  4. Are there any applications pending with other companies? What amount?
  5. Who is the payor?

What Needs Can a 10-Million-Dollar Policy Meet?

All life insurance cases, but notably $10 million and over, are reviewed from a needs-based approach, and premiums must be within the insurer’s affordability underwriting guidelines and bear a reasonable relationship to a loss.

Here are the needs a $10 million life policy can meet:

1. Income Replacement

Replacing a lost income due to untimely death is a legitimate reason for life insurance. Its purpose is to provide a stream of income to beneficiaries to maintain the current lifestyle, not to create a lavish lifestyle.

Hence, insurance companies determine the face amount you are eligible for using a combination of two methods:

  1. Income factor table: They calculate your face value based on earned and unearned income (passive) using a multiple of earned income method. Earned income is defined as income that will terminate upon the insured’s death, such as salaries, social security, or cash distribution from a business. Unearned income doesn’t cease upon the death of the insured, such as investment, 401(k) distribution, or rent collection from investment. From the insurance company’s standpoint, a portion of unearned income can be added to the multiplier formula, but not all, since it isn’t passive income and doesn’t depend upon the insured’s life. The table below shows the younger you are, the higher the multiplier you can use, and as you get older, the need for life insurance diminishes and so does the multiplier. For instance, those under 30 years old need to make at least $250,000 (income ×40) per year to qualify for a 10-million-dollar policy, and those in their 60s (income × 10) will need to make a million per year to be eligible for the same coverage.
  2. Premium-to-income relationship: A good rule of thumb to follow is that your total premium should not exceed 10% of the payer’s pre-tax income. Some companies have this factor at 5%. For instance, if your income is $100,000 per year, your premium must be under $10,000 per year.

Income Factor Table

income factor table

2. Estate Conservation

High net-worth individuals who seek asset protection and estate tax planning purchase life insurance to help mitigate the significant tax cost a beneficiary will incur due to the estate transfer.

Doing so also helps conserve the assets in the family instead of selling them to meet the tax obligation when that time arrives. At the time of publication, the estate tax can be upward of 40 percent and are subject to estate tax if the property is valued more than $5.49 million.

The insurance carrier will use interest rates ranging from 5% to 10% to estimate future value, depending on the applicant’s age and growth spans, which are typically 7 to 20 years. By estimating a property’s future value, they can permit a larger policy if needed.

3. Charitable Giving

For many wealthy individuals, the need to give back or pay forward is a reason to live. A life insurance policy can be used to satisfy such a requirement should the donor die.

The underwriter will estimate such value based on the potential financial loss an institute will suffer due to the donor’s death. As part of the underwriting process, the underwriter will request evidence of present and past giving along with a pledge of future donation which is outlined in an agreement of some sort.

Typically, the amount you will be granted is around ten times the annual contribution.

4. Key Person

Key person life insurance is intended to protect a key employee in the company. This is frequently viewed as the amount required to replace such a person. A key person is a valuable employee who is not a business owner.

The underwriter will want to see yearly income for the last few years, and the amount of life insurance is usually 5–10 times his or her annual income. In this instance, to buy a 10-million-dollar policy, your key employee must earn 1–2 million per year.

5. Funding a Buy-Sell Agreement

This agreement involves a business owner who wishes to sell the entire business to someone upon his death. The person who proposes to buy the business holds a life insurance policy equal to the value of the company.

Upon the death of the business owner, the buyer can use the death benefit funds and purchase it from the owner’s estate. This buy-sell agreement allows the continuation of the business by choosing a successor and supplying him with the cash to buy it later on.

You can expect to get a death benefit amount that is equal to the business’s current value.

Prepare to Provide Documentation

Buying a 10-million-dollar life insurance policy will be approached very differently than buying lower face amounts. You will need to provide third-party documentation to support your income, debts, and net worth based on the reason for your insurance. For instance, if you need income replacement, you will need to show your yearly income. If you seek a buy-sell agreement, the value of your business will be required.

Below is a list of some of the documentation you must provide based on the reason you buy insurance:

  • Attorney letter
  • CPA letter
  • Audited CPA statements
  • Broker-dealer statements
  • Tax returns
  • Tax assessment or appraisal
  • W-2 forms
  • Charitable giving statements

10-Million-Dollar Term Life Insurance Monthly Rates

10-Year Level Term Male

 AGE$10,000,000
 20$138.25
 25$138.25
 30$138.25
 35$154.00
 40$221.38
 45$385.06
 50$627.06
 55$1,132.06
 60$1,903.06
 65$3,444.06
 70$5,931.47
 75$12,111.31
 80$22,695.84

10-Year Level Term Female

 AGE$10,000,000
 20$111.32
 25$111.32
 30$111.41
 35$125.13
 40$194.25
 45$337.06
 50$509.06
 55$813.06
 60$1,227.06
 65$2,129.06
 70$3,616.16
 75$7,674.31
 80$18,434.59

20-Year Level Term Male

 AGE$10,000,000
 20$267.49
 25$265.50
 30$272.15
 35$299.25
 40$424.06
 45$759.06
 50$1,197.06
 55$1,990.06
 60$3,520.06
 65$6,868.06
 70$15,326.13
 75NA
 80NA

20-Year Level Term Female

 AGE$10,000,000
 20$196.93
 25$196.93
 30$203.00
 35$246.75
 40$352.06
 45$633.15
 50$949.50
 55$1,581.09
 60$2,632.28
 65$4,802.84
 70$10,991.28
 75NA
 80NA

30-Year Level Term Male

 AGE$10,000,000
 20$456.65
 25$456.66
 30$511.88
 35$596.75
 40$899.59
 45$1,470.98
 50$2,443.69
 55$4,639.49
 60NA
 65NA
 70NA
 75NA
 80NA

30-Year Level Term Female

 AGE$10,000,000
 20$348.34
 25$349.80
 30$373.63
 35$488.34
 40$717.60
 45$1,122.50
 50$1,758.74
 55$3,340.49
 60NA
 65NA
 70NA
 75NA
 80NA

*All rates quoted on this page are for a super-preferred healthy individual who does not use tobacco. Monthly rates are updated as of May 2019 and are subject to underwriting approval.*

Bottom Line

Purchasing a 10-million-dollar life insurance coverage is reserved for those who have the financial requirements, provided they can prove it through third-party documentation.

You will be looked at through a microscope when applying for a 10-million-dollar policy for the obvious reason: the carrier is on the hook for millions should you die.

In addition to being able to afford it, you may also be required to undergo different testing based on your age or overall health, such as EKG, stress test, or providing an attending physician statement (APS).

You can go ahead and use the form on this page to compare rates from top-rated companies, or you can give us a call at 866-326-3053, and one of our licensed brokers can guide you through.

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