Part of our guide: Impaired Risk Life Insurance Underwriting by Condition →
Successful clients usually expect to be worth more later, and many would rather buy the coverage now than face tougher medical underwriting at an older age. Whether a carrier will justify that extra coverage depends on why it’s being bought.
Key takeaways
- For estate planning, most carriers allow the projected estate to be indexed for growth when justifying coverage.
- A common formula uses a reasonable interest rate (often 3–4%) for 75% of life expectancy, capped at 15 years, though it varies by carrier.
- For buy-sell funding, carriers generally won’t count anticipated growth in business value; key person coverage may justify additional insurance instead.
A common indexing formula: grow the estate at 3–4% for 75% of the insured’s life expectancy, up to 15 years.
Why clients want to insure future value
Clients funding a future estate tax liability or a business buyout know their numbers will grow. Buying enough coverage now avoids the risk that their health changes and more coverage becomes expensive or unavailable later.
Indexing for estate planning
Most carriers let clients index their estimated taxable estate (usually close to net worth) for growth. A common approach applies a reasonable rate, often 3–4% unless there’s a compelling reason for more, over a period equal to 75% of the insured’s life expectancy, not to exceed 15 years. The details differ by company, so indexing rules can decide which carrier fits a large case. With the federal exemption now set at $15 million per person from 2026, this matters most for clients whose estates will exceed that amount, or who live in states with their own estate tax.
Why buy-sell cases are treated differently
It would seem logical to index a business’s value the same way, since owners expect the company to grow. Carriers generally don’t allow it: coverage for a buy-sell is justified on the current agreed value. One likely reason is that someone other than the insured’s heirs benefits from the extra coverage. If more coverage is needed, key person insurance may be a legitimate way to justify it.
Plan the financials early
Financial underwriting issues are easier to solve at the start of a case than after an application stalls. Talk to us before you apply about the justification and which carrier’s guidelines fit the plan.
Frequently asked questions
Can a client buy life insurance for the estate they expect to have?
Often, yes. Many carriers allow the current estate to be projected forward at a reasonable growth rate when justifying coverage for estate planning.
Can business value be indexed for buy-sell coverage?
Generally not. Carriers usually base buy-sell coverage on the current agreed value. Key person coverage may justify additional insurance.
Does indexing vary by carrier?
Yes. Growth rates, time periods, and caps differ, which can make indexing rules a deciding factor in carrier choice for large cases.
Reviewed by Tim Fuller on 2026-09-25
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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