Life Insurance Financial Guidelines

Not sure how much term life insurance you qualify for? Use this.

Your Life Insurance Need

Just like your current health is a big part of life insurance underwriting, so is your financial situation. You must qualify financially for the amount of coverage you are requesting.

These are some factors life insurance companies consider when financially underwriting your application:

  • Reason for the insurance
  • How the amount of coverage was determined
  • Total amount of life insurance you have with all companies
  • Any pending applications with other companies
  • Any life insurance policies to be replaced
  • Total amount of life insurance you intend to keep
  • Reasons for any unusual owner or beneficiary designations

Life insurance companies may require any of the following financial information to justify the amount of coverage they will allow:

  • Annual earned income
  • Annual unearned income from investments
  • Total net worth
  • Amount of coverage your spouse has
  • Business financial documents (usually for business-related coverage)
  • Documentation for any other unique financial circumstances

Your annual income provides the basis for your insurance need. All companies use a multiple of your income to help determine your insurance need. If your request falls outside these guidelines, the company will turn to other financial information to help determine the need.

Here's an example of an insurance company's income guidelines.

Age Coverage Amount Allowed
21 - 40 30 x Earned Income
41 - 50 20 x Earned Income
51 - 60 15 x Earned Income
61 - 69 10 x Earned Income
70+ Individual Consideration

Spouse With No Earned Income

Life insurance companies will insure spouses with little or no income, as long as the income-earning spouse has coverage. Below are guidelines many life insurance companies use:

  • Will allow up to 100% of the income-earning spouse's life insurance amount
  • Maximum allowed varies by company, with a range of $500,000 to $3,000,000

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