Term Life Insurance: Maximum Payout?

Posted in Life Insurance , Term Insurance

September 24th, 2009

Term life insurance is an important level of protection if you are the head of your household. You need it to ensure that your family will be financially protected in case the policyholder dies prematurely. Term life insurance policies are extremely popular as they are straightforward and affordable. However, the larger the maximum payout for your term life insurance policy you choose, the more money you will paying for your family to receive that death benefit.

Increasing Payouts

In 2004, two insurance giants, Prudential Financial and MetLife were experiencing profit declines due to the lowering prices of insurance premiums as more people were opting to choose affordable term life insurance policies over costly permanent life insurance. As a way to generate a larger income stream, they both switched their insurance underwriting procedures to increase the maximum payout amount for term life insurance. The strategy was to encourage consumers to buymore coveragespecifically in the form of term-life policies.

Deciding on Benefit Amounts

The maximum payout for a term life insurance policy is commonly a formula based on your annual salary times a certain period of years. According to the Wall Street Journal,a 30-year old earning $100,000 annually could possibly get a maximum payout amount of $3 million for their term life insurance policy.

Even though you may want to shower your family with cash after you die, you should not do so if affording the higher premium payments will send you to an early grave. Those interested in a term life insurance policy need to calculate what a comfortable maximum life insurance benefit will be for their family to live on, and that can be worked into their budget while the policy holder is living and paying the premiums.