$5 million life insurance is a policy that comes with a $5 million coverage amount. A $5 million life insurance policy may be necessary for high-net-worth individuals with large financial protection needs, but a financial advisor or insurance professional can help you decide the right coverage for your unique situation.
What is $5 million life insurance?
A $5 million life insurance policy can be any type of life insurance — for example, term life insurance or whole life insurance — as long as the coverage amount is $5 million. This means that if you die while the policy is active, your beneficiaries can file a claim for $5 million.
Who needs a $5 million life insurance policy?
If you’re making at least $250,000 per year, you’ll probably need a $5 million life insurance policy to keep your loved ones from financial hardship if you die. Your coverage amount should help your family cover things like the cost of daily living, and any other expenses they’d be responsible for if they had to live without your income.
Generally speaking, you can estimate how much coverage you need by factoring in expenses like:
The amount left on your mortgage
Your income multiplied by the number of years your family will depend on it
The cost of children’s education
For instance, let’s say you make $250,000 per year. If you’re in your 40s and expect to retire at age 65, you may need up to 20 more years of income protection for your family, which could put your coverage amount around $5 million.
Even if you’re a high-income earner who is approaching the point where you’ve saved enough money to fulfill your main financial obligations, or you don’t need coverage, it often makes sense from a financial security perspective to pay a relatively nominal premium for insurance — just as you would insure your house, car, or other assets.
High-net-worth individuals can also use life insurance to:
Offset estate taxes if your estate will be valued over $12.92 million 
Provide a tax-free inheritance to your loved ones
Everyone’s financial situation is different, so it’s best to work with a financial advisor or a life insurance professional to assess your needs.
Who can qualify for a $5 million life insurance policy?
If your financial obligations like the ones listed above add up to $5 million or more, you’ll likely qualify for a policy with that coverage amount .
Most insurance companies use income multipliers for financial justification, which places applicants into brackets that determine how much coverage they qualify for.
Usually, the younger you are, the higher the coverage amount you’re likely to get approved for. For example, if you’re in your 20s or 30s, you may qualify for a death benefit up to 30 times your income. If you’re in your 60s, you may do so for up to 10 times your income.
Below is an example of how much life insurance you’re likely to qualify based on your age, though every insurer has its own guidelines.
Age 18 to 40: 25x to 30x income, or sometimes higher
Age 41 to 50: 20x income
Age 51 to 60: 15x income
Age 60 to 65: 10x income
Age 66 and above: 5x income
The idea is that the older you are, the fewer working years you’ll have left — and the less income you’ll need to replace.
So, if you’re 40 years old and making $250,000 annually, a $5 million policy is 20 times your income. Therefore, you’d be able to qualify for a policy with this coverage amount.
What types of policies offer a $5 million payout?
Term life insurance and permanent life insurance — the two main types of life insurance — can both offer payouts of $5 million.
Term life insurance is one of the most common life insurance options on the market — and all the coverage that most families need. It lasts for a set number of years and comes with few tax rules and restrictions. Term life is significantly cheaper than permanent life insurance policies. Generally speaking, if you’re looking for a coverage option to make sure your family won’t suffer financially in your absence, term life is your best bet.
Whole life insurance — one of the most popular types of permanent life insurance — can be an option for people looking to use life insurance to diversify their investment portfolio, or those with permanent financial needs, like dependents who require lifelong care or specific estate planning goals. Whole life is much more expensive than term life, since it doesn’t expire and it also comes with a cash value component.
Universal life insurance is another type of popular permanent coverage. It offers more flexibility because you can increase or decrease how much you pay toward premiums, and you can eventually use your cash value to cover your premiums entirely if you so choose.
A financial planner or insurance professional can help you determine which type of life insurance is best for you. If you have a high net worth, a combination of both term life and permanent life insurance might be the right approach to fulfill your financial protection needs.
How much does a $5 million life insurance policy cost?
Whole life insurance is approximately five to 15 times more expensive on average than a comparable term life policy. In the case of $5 million policies, the discrepancy is often even higher.
For instance, 40-year-old male who doesn’t smoke and has few health conditions might pay $302.37 per month for a $5 million term life insurance policy that lasts for 20 years. That same person would pay $6,843 — or about 22 times more — for per month for a $5 million whole life insurance policy.
Your premiums — the cost of your policy — will depend largely on the type of policy you’re looking for. A Policygenius agent can help you find the right coverage for you at the cost you’re looking for.
Term life rates vs. whole life rates
$5 million coverage amount, 20-year term life
$5 million coverage amount, whole life
How can you buy a $5 million life insurance policy?
You’ll buy your $5 million policy much like you would any other policy — but there may be a few extra requirements.
First, you’ll connect with a licensed agent. You can compare life insurance quotes and complete your application. This includes filling out some basic identifying information, plus details about your health and financial needs.
Next, you’ll complete a medical exam. The medical exam is a standard part of the application process, especially if you’re applying for more than $3 million in coverage. The exam is similar to an annual physical at your doctor’s office — a licensed practitioner usually conducts the exam at your home or office and it takes about 30 minutes.
Depending on your age, the insurance company may request additional information to confirm your health status and finances. This helps accurately assess risk.
After that, you’ll wait for the insurance company to review your application and exam results. This is called underwriting, and the process takes about four to six weeks on average.
Once you have your final policy offer, you can sign the policy documents to make your coverage active. Your policy will remain active for the duration of the term, or as long as you continue to make premium payments.
What are the requirements for a $5 million life insurance policy?
Life insurance companies sometimes require a few extra pieces of information during underwriting for multi-million-dollar life insurance policies.
If you’re over the age of 60 applying for $5 million or more in coverage, many insurers will automatically request an attending physician statement (APS) to learn more about your health.
If you’re over the age of 50 and applying for $5 million or more, some insurance companies request an EKG (also abbreviated ECG, standing for electrocardiogram) to accompany the rest of your health profile. Again, this helps the insurer accurately assess risk when it comes to your health profile.
You may have to fill out a tax transcript form (4506-C) for income verification if you’re applying for $5 million in coverage or higher. This is so the insurance company can be certain that you’re qualified for the amount of coverage you’re seeking, and you’re able to pay for the policy.
Every insurer may have slightly different guidelines when it comes to extra requirements for life insurance policies with high coverage amounts — but a Policygenius agent can help you navigate the whole application process with confidence.
At Policygenius, we can help you compare top insurers in one place to find the one that’s best suited for your profile and financial needs. Our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
Best companies for a $5 million life insurance policy
The best life insurance company for you will depend on your unique circumstances and financial protection needs. Below are a few Policygenius partners that can be ideal if you’re applying for multi-million-dollar life insurance policies.
Pacific Life is an A+ rated company according to AM Best. When it comes to applying for high coverage amounts, it’s particularly flexible. For example, it doesn’t require an EKG if you’re above a certain age or applying for a high coverage amount. This helps streamline the application and underwriting processes and gets you coverage faster. Pacific Life’s rates can also be cheaper than those from other insurers.
Lincoln Financial has relatively flexible guidelines when it comes to completing tax forms for high value life insurance policies — typically, you’ll only need to fill out additional tax details if you’re applying for $5 million in coverage and you’re over the age of 70. Lincoln is another A-rated insurer according to AM Best, so the company has solid financial standing.