To most people, the idea of a million dollars can feel kind of abstract, like the grand prize on a TV game show. But when it comes to making real life future plans, like figuring out how much life insurance coverage you might need to take care of your loved ones, that number can start to feel a little more real.
Have you ever wondered what the real average cost of a million-dollar life insurance policy might be? What are the term life insurance rates of a policy with million-dollar coverage and, more importantly, is it worth it?
What is a Million-Dollar Term Life Insurance Policy?
If you’ve accumulated a vast stash of cash and assets throughout your life, congrats! You can probably stop reading this article now. But the reality is most people don’t have that luxury. If that sounds more like you, a life insurance policy could be one way to offer some financial protection to your loved ones should you unexpectedly pass away.
Regardless of which life insurance policy you choose to purchase, you’ll want to make sure that the policy you select has a payout amount that meets the needs of your loved ones. A payout, also known as a death benefit, is the agreed upon amount of money your beneficiaries will receive from an insurer upon your death.
If you go with a million-dollar term life insurance policy, the death benefit would be (drumroll please) $1 million. While not everyone needs that much coverage, if you’re a middle-income household, it’s something you may want to investigate. Once you stop to add up your bills and possible final expenses, you may find a $100,000 or $200,000 policy to be inadequate depending on your family’s financial situation.
Eligibility for Million-Dollar Life Insurance
The application process is the same whether you are applying for a $500,000 or a million-dollar life insurance policy. The primary difference is the monthly premium — a higher value policy will have higher premiums.
Qualifying for life insurance is a multifaceted formula. An insurance provider will typically look at your age, health, and lifestyle (including smoking habits) to determine eligibility and rates.
One last note on million-dollar eligibility: life insurance companies may limit the amount of death benefit they issue based on income, age, and any other life insurance policies you may own.
Do You Need a Million-Dollar Life Insurance Policy?
Thinking about buying a million-dollar life insurance policy? Consider these questions:
- Are you the household breadwinner? Think of the people you are planning on naming as beneficiaries. If these loved ones count on you as the main family income earner, consider coverage that is five to ten times your annual salary.
- What are your monthly expenses? Examine your lifestyle. Some families live frugally while others have higher daily living expenses.
- How much do you pay for housing? Whether it’s a mortgage or rent, you’re likely shelling out some sort of monthly payment for your home base.
- Do you have children? This is a biggie. If you have young children, consider the cost of childcare should you pass away— college tuition and major life expenses like braces and first cars.
- Where are you at with your student loans? Speaking of college tuition, if you are still paying off student debt, it’s something to factor in when calculating your ideal death benefit.
- Are you carrying additional debt? If you have credit card debt, car payments, or long-term loans, you’ll want to consider the cost of paying those off.
- Will you have an extravagant funeral? Some people want an extravagant send-off. If that is the case for you, add this to your coverage consideration column.
Your ultimate goal is to make sure that your family has some financial resilience should you unexpectedly die.
Who Might Need a Million-Dollar Life Insurance Policy?
Let’s look at a hypothetical person, a mom, shopping around for insurance. This mom loves yoga, suspense novels, and golden retrievers (she has three of them). Her younger sister just bought a life insurance policy and now she is realizing she needs to do the same.
Here are some financial details about her life:
- She is her family’s primary earner, making $160K per year as a dentist.
- Her partner is a stay-at-home parent to their two toddlers and three dogs.
- They live in a 4-bedroom house and have a $2100/mo mortgage payment.
- She drives an electric vehicle and has a $500 monthly car payment.
- She still has $20,000 in student loan debt to pay off (sound familiar?).
- She and her partner are carrying around $2,000 in credit card debt.
She wants to set her family up to live comfortably should anything happen to her, so she makes a list of her family’s total income, savings and investments, debt (car, house, student loans, etc.), the amount of money she thinks the twins will need for school, and then she factors in the cost of her funeral.
Possible Coverage Considerations
Our hypothetical mom and her partner decide that should she die unexpectedly, her partner would need enough income replacement to get through five years. Using the information below, they determine that the amount of coverage they need is around $1,074,000.
- Annual income: $160,000
- Additional savings: $33,000
- Total debt: $197,000
- Final expenses: $5,000
- College tuition: $100,000
Estimated cost of million-dollar term life insurance policy:
| Age | Policy Value | Term Length | Premium |
|---|---|---|---|
| 25 | $1M | 30 years | $44.33/mo* |
| 30 | $1M | 30 years | $51.83/mo* |
| 35 | $1M | 30 years | $61.00/mo* |
Do You Need to Take a Medical Exam?
Many term insurance policies require a comprehensive medical exam and lab test to qualify for coverage. Insurers typically look at your healthy history, nicotine use (or lack thereof), blood pressure, and cholesterol levels, amongst other factors.
Some companies do let you skip the medical exam and use alternate technology-driven methods instead. With Bestow, you can skip the physical exam and instead answer some general questions about your health, medical history, and lifestyle to help determine your eligibility.
Financial Resilience for the Ones You Love
There’s no magic wand you can wave to show you the best life insurance policies available.
Rather, you should set aside some time to do your research, and possibly consult with a financial advisor, and think about what’s best for your family’s unique needs.
Consider starting your journey with a fast, free for term life insurance. If you like what you see, you can apply for a million-dollar term life policy online. It only takes a few minutes, and upon approval, you can purchase up to $1.5 million in life insurance coverage.
Whether it’s a million-dollar policy or a smaller term life policy, the important thing is making sure you feel comfortable with your choice, and that you can rest a little easier knowing you’ve got a future plan in place to help offer your family some financial protection.
Key Takeaways
- Million-dollar life insurance policies can help provide some peace of mind for those with house payments, debt, and dependents (or future plans for dependents).
- In some cases, you can apply for a million-dollar term life insurance policy without a medical exam.
- The premiums for a policy with a million dollars or more in coverage may be less than you think. Get a free and fast quote to get a better idea of what your rates could be.
