Life insurance at larger amounts

What the coverage is usually for

• Estate liquidity — paying obligations without forcing a sale of illiquid assets
• Equalising inheritances where assets can't be divided, such as a business or property
• Funding a buy-sell agreement between business partners
• Key person coverage on someone the business depends on
• Charitable giving structured through a policy

Ownership is the structural question

Who owns a policy can affect how the death benefit is treated for estate purposes, which is why irrevocable life insurance trusts exist as a structure.

Getting this wrong can defeat the point of the coverage. It's the clearest example on this site of something that needs an attorney rather than a form.

Spreading coverage across carriers

Two reasons. First, individual insurers have retention limits and may reinsure or decline very large amounts. Second, state guaranty association protection is capped — commonly $300,000 of death benefit, higher in a few states.

Coverage well above that cap sits outside guaranty protection, which makes the insurer's own financial strength rating materially more important, and makes splitting across carriers a legitimate consideration.

Underwriting at large amounts

Expect more of it. Financial underwriting — verifying income and net worth to justify the amount — sits alongside medical underwriting, and the process takes longer.

• Tax returns and financial statements
• An accountant's or attorney's letter
• Business valuation, where relevant
• Fuller medical examination, sometimes including additional testing