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When people think about life insurance, they often consider policies in the range of a few hundred thousand to a couple of million dollars. But for high-net-worth individuals, business owners, and those with significant financial responsibilities, a $10 million life insurance policy can be a smart and necessary financial move.
If you’re wondering whether this level of coverage is excessive or essential, we’ll break down everything you need to know. We’ll discuss who needs it, how much it costs, how to qualify, and the best ways to structure your policy for maximum benefits.
Who Needs a $10 Million Life Insurance Policy?
While $10 million in coverage may sound excessive for some, there are several situations where it makes perfect sense. Here are the most common reasons people opt for this high level of coverage:
1. High-Net-Worth Individuals
If you have a high net worth, you may want to ensure your family can maintain their lifestyle and cover estate taxes without selling assets. Life insurance can provide liquidity when it’s needed most.
2. Business Owners & Entrepreneurs
Business owners often have complex financial obligations, including business loans, payroll, and operational expenses. A life insurance policy can ensure that the business continues running smoothly even in their absence.
3. Real Estate Investors
If you have significant real estate holdings, estate taxes and debt obligations can create financial stress for your heirs. A $10 million policy can protect your properties from being sold at a loss to cover these expenses.
4. Physicians, Attorneys & Other High-Earning Professionals
Many professionals carry high student loan debt, mortgages, and other financial responsibilities. If you have dependents, a large policy ensures they are financially secure.
5. Families with Large Financial Responsibilities
If you’re the primary earner in a household with significant expenses—private school tuition, college funds, or special medical needs—a large life insurance policy ensures that your loved ones don’t struggle financially in your absence.
How Much Does a $10 Million Life Insurance Policy Cost?
The cost of a $10 million life insurance policy depends on several factors, including:
- Age – Younger individuals get lower rates.
- Health – A clean medical history results in lower premiums.
- Policy Type – Term life is cheaper than permanent life insurance.
- Lifestyle – Risky hobbies or occupations increase costs.
- Smoking Status – Smokers pay significantly higher rates.
Average Monthly Premium Estimates
| Age | 20-Year Term Policy | Whole Life Policy |
| 30 | $300 – $800 | $5,000 – $8,000 |
| 40 | $500 – $1,200 | $7,000 – $12,000 |
| 50 | $1,200 – $3,000 | $12,000 – $20,000 |
A term policy is significantly more affordable than whole life insurance, which builds cash value and lasts a lifetime.
How to Qualify for a $10 Million Life Insurance Policy
Because a $10 million policy is a substantial amount, insurers require applicants to prove their financial need and insurability. Here’s what you’ll need:
1. Justification for Coverage
Insurance companies don’t approve large policies without a valid reason. You must demonstrate financial justification, typically based on:
- Income Multiples – Insurers often approve coverage up to 20–30 times your annual income.
- Estate Planning Needs – If estate taxes would exceed $10 million, a policy might be necessary.
- Business or Investment Debt – Insurers may approve policies to cover outstanding obligations.
2. Medical Exam & Underwriting
Most insurers require a medical exam to assess health risks. This includes:
- Blood work & urine tests
- Blood pressure and BMI checks
- Reviewing family medical history
If you’re in excellent health, you’ll get the lowest premiums.
3. Financial Documentation
Expect to provide:
- Tax returns
- Financial statements
- Business valuation (if applicable)
For policies exceeding $10 million, insurers often conduct third-party financial reviews to verify your income and assets.
Term vs. Permanent Life Insurance: Which Is Best?
There are two main types of life insurance to consider when purchasing a $10 million policy:
1. Term Life Insurance ($10 Million Coverage for a Set Period)
- Pros: Affordable, simple, high coverage
- Cons: Expires after a set term (10, 20, or 30 years), no cash value
2. Permanent Life Insurance ($10 Million Coverage for Life)
- Pros: Lasts a lifetime, builds cash value
- Cons: High cost, complex investment components
Which One Should You Choose?
- If you want temporary protection at an affordable price, go with term life insurance.
- If you need permanent coverage with estate planning benefits, whole life or universal life may be the better option.
Smart Strategies for Structuring a $10 Million Life Insurance Policy
Purchasing a $10 million life insurance policy requires careful planning. Here are a few ways to optimize it:
1. Use an Irrevocable Life Insurance Trust (ILIT)
An ILIT removes the policy from your estate, helping to avoid estate taxes and protect heirs.
2. Consider Layering Multiple Policies
Instead of one $10 million policy, you can ladder multiple term policies to save on costs. Example:
- $5 million 10-year term
- $3 million 20-year term
- $2 million permanent policy
3. Use Life Insurance for Business Succession Planning
If you own a business, consider a buy-sell agreement using life insurance. This ensures business continuity if a key owner passes away.
Tax Implications of a $10 Million Life Insurance Policy
A $10 million policy is a significant financial asset, and its tax treatment depends on how it is structured. Understanding tax advantages and potential liabilities is critical for maximizing benefits.
1. Is Life Insurance Payout Taxable?
Generally, life insurance death benefits are not subject to federal income tax. Your beneficiaries will receive the full $10 million payout tax-free. However, there are exceptions:
- If the policy is owned by your estate, the payout could be subject to estate taxes.
- If a policy is transferred for value, the “transfer-for-value” rule could trigger income taxation.
2. Estate Tax Considerations
For 2024, the federal estate tax exemption is $13.61 million per individual (or $27.22 million for married couples). If your total estate value exceeds this threshold, any amount beyond the exemption is subject to a 40% federal estate tax.
If a $10 million policy is included in your estate, it could push your total estate value beyond the exemption, triggering a hefty tax bill.
Solution: Use an Irrevocable Life Insurance Trust (ILIT)
To shield the policy from estate taxes, an ILIT should own the policy instead of the insured. This ensures that:
- The death benefit is not included in the taxable estate.
- Beneficiaries receive the full $10 million payout without tax erosion.
- The policy can provide liquidity to cover estate taxes without selling assets.
Setting up an ILIT requires careful legal structuring, so consult with an estate planning attorney.
3. Gift Tax and Life Insurance Premiums
If an ILIT owns the policy, the premiums paid into the trust may be subject to gift tax. However, this can be mitigated using Crummey provisions, which allow beneficiaries to receive temporary withdrawal rights, qualifying the contributions as annual gifts.
For 2024, the annual gift tax exclusion is $18,000 per beneficiary. Using multiple beneficiaries allows you to transfer larger amounts into the trust without incurring gift tax liabilities.
How Business Owners Can Leverage a $10 Million Life Insurance Policy
Business owners often require large insurance policies to protect their enterprises and ensure continuity. Here’s how you can use a $10 million policy in business planning:
1. Key Person Insurance
If your business relies on a key executive, partner, or owner, their unexpected passing could cause significant financial strain. A key person life insurance policy helps:
- Cover revenue losses.
- Fund executive replacement costs.
- Stabilize the company during transition.
The business owns and pays for the policy, and it receives the death benefit if the key person passes away.
2. Buy-Sell Agreements
For businesses with multiple owners, a buy-sell agreement funded by life insurance ensures smooth succession. Here’s how it works:
- Each owner takes out a life insurance policy on the other owners.
- If an owner dies, the payout is used to buy out the deceased partner’s share.
- This prevents outside parties from gaining control and protects the business’s stability.
3. Collateral Assignment for Business Loans
Lenders often require life insurance as collateral for business loans. A $10 million policy can serve as collateral to:
- Secure financing.
- Guarantee repayment in case of death.
- Provide stability for investors and stakeholders.
Proper structuring ensures that the death benefit first repays the loan, with any remaining amount going to beneficiaries.
Investment Strategies Using Permanent Life Insurance
For high-net-worth individuals, permanent life insurance can be used as an investment vehicle.
1. Whole Life Insurance as a Cash Accumulation Tool
Whole life insurance builds guaranteed cash value, which grows over time. Policyholders can:
- Borrow against the cash value at low interest rates.
- Use it as an alternative to traditional investments.
- Supplement retirement income with tax-advantaged withdrawals.
However, whole life insurance policies come with higher premiums and slower growth compared to other investment options.
2. Indexed Universal Life (IUL) for Market-Linked Growth
IUL policies allow cash value growth based on stock market index performance while protecting against market downturns. Benefits include:
- Tax-free policy loans against accumulated cash value.
- Higher growth potential compared to whole life insurance.
- Flexible premium payments.
While IULs offer growth potential, policy charges and caps on returns should be carefully evaluated.
3. Private Placement Life Insurance (PPLI) for Wealthy Investors
PPLI is a highly customized investment-focused life insurance policy that allows wealthy individuals to invest in hedge funds and alternative assets within a tax-advantaged structure.
Benefits include:
- No capital gains tax on policy growth.
- Tax-free withdrawals and loans.
- Estate tax minimization when structured within an ILIT.
PPLI requires significant assets (typically $5 million+) and specialized planning.
Common Mistakes to Avoid When Purchasing a $10 Million Life Insurance Policy
Purchasing a large life insurance policy requires careful planning to avoid costly mistakes.
1. Underestimating the Underwriting Process
Higher coverage amounts come with stricter underwriting requirements. Common reasons for denial include:
- Undisclosed medical conditions.
- High-risk occupations or hobbies (aviation, scuba diving, extreme sports).
- Financial justification issues.
To improve approval chances:
- Work with an independent broker who specializes in high-value policies.
- Complete a medical exam proactively to identify potential concerns.
- Provide accurate financial documentation.
2. Choosing the Wrong Type of Policy
Many buyers automatically choose whole life insurance without considering term policies.
- If you need temporary coverage for income replacement or debt protection, opt for a term policy.
- If estate planning or tax efficiency is the priority, use whole life or universal life.
3. Failing to Update Beneficiaries
Outdated beneficiary designations can lead to:
- Unintended recipients (e.g., an ex-spouse).
- Legal disputes and probate delays.
Review and update beneficiary designations at least once a year.
4. Ignoring Policy Loans and Lapses
Permanent life insurance allows borrowing against cash value, but unpaid loans can reduce the death benefit or even cause policy lapse.
To avoid this:
- Monitor loan interest rates and repayment terms.
- Ensure premium payments are maintained to keep the policy active.
5. Not Considering Inflation’s Impact
A $10 million policy today might not be worth as much in 20–30 years due to inflation.
- Consider inflation-adjusted policies or increasing benefit riders.
- Reevaluate coverage periodically to ensure sufficient protection.
Making the Most of a $10 Million Life Insurance Policy
A $10 million life insurance policy is more than just financial protection—it’s a strategic tool for wealth preservation, estate planning, and business continuity.
To maximize benefits:
- Work with an experienced financial planner to customize your policy.
- Use trusts and advanced planning techniques to minimize tax exposure.
- Regularly review and adjust coverage to align with financial goals.
By structuring your policy properly, you ensure that your loved ones and business interests are protected for the long term, providing financial security and peace of mind.
Frequently Asked Questions (FAQs) About $10 Million Life Insurance
Can I get a $10 million life insurance policy without a medical exam?
Yes, but it’s rare. Most insurers require a medical exam for high-value policies. However, some no-exam life insurance options exist for applicants in excellent health, but coverage may be limited or significantly more expensive.
Can I use a $10 million life insurance policy for retirement planning?
Yes. Permanent life insurance (such as whole life or indexed universal life) builds cash value that can be accessed tax-free via policy loans. Many high-net-worth individuals use life insurance as a tax-advantaged retirement tool alongside traditional investment accounts.
How does inflation affect a $10 million policy over time?
Over several decades, inflation can erode the purchasing power of your death benefit. Some solutions include:
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- Choosing a policy with an inflation rider that increases coverage over time.
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- Combining term and permanent life insurance for flexibility.
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- Periodically reviewing and adjusting coverage to ensure adequate protection.
Can I finance my life insurance premiums for a $10 million policy?
Yes. Some high-net-worth individuals use premium financing, where a bank loans funds to pay premiums, and the policy’s cash value is used as collateral. This strategy is complex and requires careful financial planning.
What happens if I move to another country after buying a $10 million policy?
Most policies remain valid if you move abroad, but:
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- Some insurers have restrictions on coverage in high-risk countries.
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- Premium payments may need to be made from a U.S.-based bank account.
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- If residency changes, estate tax implications could shift, requiring new planning strategies.
Can I sell my $10 million life insurance policy for cash?
Yes. This is called a life settlement, where a third party buys your policy for a lump sum. It’s often an option if:
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- You no longer need coverage.
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- You prefer cash over a future payout.
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- Your health has declined, increasing the policy’s value.
However, selling a policy means your beneficiaries won’t receive the death benefit.
How does a $10 million policy impact estate planning for non-U.S. citizens?
Non-U.S. citizens can buy life insurance in the U.S., but:
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- Estate taxes may apply if the policy is owned directly.
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- Using a foreign trust or offshore life insurance structure may provide tax benefits.
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- Premium financing options may be limited for non-residents.
Can I add riders to customize my $10 million policy?
Yes. Common riders include:
- Disability waiver of premium – Covers premiums if you become disabled.
- Accelerated death benefit – Allows early access to the payout if diagnosed with a terminal illness.
- Long-term care rider – Lets you use part of the death benefit for nursing home or in-home care.
- Conversion rider (for term policies) – Allows switching to permanent life insurance without a medical exam.
9. What happens if my insurer goes bankrupt?
Life insurance companies are backed by state guaranty associations, which provide limited protection (typically up to $300,000–$500,000 per policyholder). To minimize risk:
- Choose a company with high financial ratings (A.M. Best, Moody’s, S&P).
- Consider splitting coverage across multiple highly rated insurers.
How do I choose the best insurance company for a $10 million policy?
For large policies, focus on:
- Financial strength – Look for A-rated insurers or higher.
- Underwriting flexibility – Some insurers are more lenient on health conditions.
- Premium stability – Check for consistent pricing over time.
- Customer service & claims history – Ensure a strong track record of payouts.
By selecting the right company, structuring your policy wisely, and reviewing it regularly, you can ensure your $10 million life insurance policy remains a valuable asset for your long-term financial strategy.
Methodology
Benzinga crafted a specific methodology to rank life insurance. To see a comprehensive breakdown of our methodology, please visit our Life Insurance Methodology page.