Life Limits Up

Physician's Money Digest, January31 2005, Volume 12, Issue 2

As cheaper term-life insurancepolicies cut into sales of whole-lifepolicies, insurance companies areraising the maximum amounts forwhich they'll write a whole-life policy.A person earning $100,000 a year cannow buy a policy from MetLife andother insurers with a maximum deathbenefit of $3 million—30 times theirannual income—up from $2 million.The industry originally imposedlimits on death benefits, fearing thatbuyers would take out huge policiesand then commit suicide so their heirswould get the cash. (Contrary to thecommon assumption, an insurer willgenerally pay up, even if the policyholdercommits suicide, if the policy ismore than 2 years old.) Insurers saythe increase in maximums is necessarybecause of low interest rates, whichraise the amount that heirs mustinvest to replace the deceased person'sincome.