Why do life insurance companies need to know my income?
I saw it on the application and it made me hesitate cause it seems kinda personal.
Answers | 1
So, here is an example: You earn 50 K per year so your multiple will be around 500K of coverage. Exceptions exist, but that is the general rule.
A related question asked this week by a MoneyTips visitor: “So, what if I already own a 500K policy and I apply for another one (and income is 50K annually) do I get to have a million if I get one months after getting the other? How would they know?” The answer is that on your later application the carrier will ask if you have life insurance in force, and the amount of the policy. Then, they will ask if you intend to keep it or replace it with the new coverage. If you state that you
are going to keep it, the additional 500K will “draw a flag” because your income indicates that 1 million is beyond your multiple. Replacing it would leave you with 500K, not 1 million, so there would be no issue.
You would think that if you stepped up with gobs of cash the carrier would just give you gobs of coverage, right? If only!