How Much Does A Million Dollar Life Insurance Policy Cost?
A $1 million life insurance policy may seem like overkill, but if you want your family to be well taken care of after you’re gone, you may find that it’s not an astronomical sum.
The size of your family and your financial situation help determine how much life insurance you need. For example, if you earn $100,000 per year and want income replacement for 10 years, that gives you a death benefit of $1 million.
Or, if you just want five years of income in lieu and leave money for your kids’ college expenses and also to pay off some debt, you can easily cross the $1 million mark. Four years at a private school, including room, board and books, cost about $200,000 (and an estimated $450,000 over another 15 years).
Don’t think you can’t afford a $1 million life insurance policy. People tend to overestimate the cost of life insurance, sometimes by three times the actual amount. See how much you can afford while looking at average rates and then get your own personal life insurance quote.
How much does a $1 million term life insurance policy cost?
We analyzed term life insurance quotes for a $1 million policy to determine the average cost. A $1 million policy for a 10-year term costs around $300 and a 20-year term around $450 if you buy coverage in your 30s and are in good health and don’t smoke.
Remember, these are averages, and your cost will depend on your own age and health, as well as other risk factors. However, our analysis of average rates will give you a general idea of what you can expect to pay.
Buying Younger Means Paying Less for a $1 Million Policy
Annual costs for 10-year, $1 million term life insurance policy
Age is the primary rating factor for life insurance, and life insurance quotes will increase each year as you age. This is simply because as your life expectancy decreases, the risk to the insurance company increases. That means you should buy coverage when you’re younger to lock in cheaper rates.
Our analysis shows big savings if you buy coverage in your 30s. Buying a 20-year term policy in your 50s or 60s means you’ll pay significantly more than if you bought coverage at a younger age:
- If you wait until age 30 to 40 to get a 20-year term $1 million life insurance policy, the rate increases to 50% for men and 65% for women.
- If you wait until age 50, the rate increases by 260% for both men and women compared to the cost for a 30-year-old.
- Waiting until age 60 increases costs by more than 950% for men and more than 600% for women, compared to if you bought back the plan at age 30. For men, the annual premium at 60 is more than $5,000. If the policy had been purchased at age 30, only $480 per year would have been locked in.
How gender affects the cost of $1 million term life insurance
As the estimated rate quote shows, gender is also a major factor when calculating life insurance rates. Women generally live longer than men, so they get a bit of a price break.
Our assessment shows that men consistently pay higher rates, regardless of age. However, the difference between the rates varies according to their age.
For example, looking at a 20-year term policy, here’s how gender affects rates:
- At age 30, men pay 38% more than women, which comes to about $130 more annually.
- At age 40, men pay 25% more, which comes to $144 more annually than women.
- At age 50, men pay 38% more than women and about $480 a year.
- At age 60, men pay 44% more than women, which comes to $1,536 annually.
$1 million term life insurance rates by term length
If you want a life insurance policy that lasts longer, you will pay more. Finding the right length for you depends on the concern you want to cover with life insurance.
You don’t want your policy to lapse before your family’s financial needs are met. On the other hand, if you buy the policy at an older age, when some of your debts have been paid off or reduced significantly, you may not need a long term.
For a $1 million policy, determine what term length is best for your particular circumstances. Don’t assume that a long period will fit your budget before determining your budget price.
Here we compare the costs for different length policies for a 30-year-old male and female.
Our analysis found that:
- Upgrading from a 10-year term to a 15-year policy increases rates by 12% for men and 23% for women.
- Moving from a 10-year to a 20-year policy costs 50% more for men but only about 30% more for women.
- For any gender, it’s a good deal to double the term of your term life insurance policy and not even come close to doubling your premium.
- To increase the policy term from 10 to 30 years, it would increase the rates by 150% for men and 123% for women.
$1 million term life insurance rates by policy amount
Our analysis looked at rates for $1 million policies compared to $500,000 to $2 million policies.
Is a $1 million term life policy right for you? You need to settle on what you want life insurance to cover (and for how long), but pricing the policy in different payout amounts will also help you determine which one best fits your budget.
Here’s a look at 20-year term policies for different payout amounts for a 30-year-old male and female.
We found that:
- A $750,000 policy costs 32% more for men and 14% more for women than a $500,000 policy.
- Increasing a policy from $500,000 to $1 million costs 60% more for men and 38% more for women. It doubles your policy amount but does not double your premium with gender.
If you’re thinking of going to higher altitudes:
A $2 million policy costs 192% more for men and 148% more for women compared to a $500,000 policy.
A $2 million policy costs 83% more for men and 79% more for women compared to a $1 million policy.
Tips on how to shop for $1 million term life insurance
The first step in shopping for any term life insurance policy is to calculate how much coverage you need.
You want your life insurance payout amount to take into account your obligations, such as mortgages, car loans, credit card balances, and any other debt you’ve accumulated. Also, consider the extra money you want to set aside to cover other financial considerations, such as income replacement or paying for college.
Here’s a calculator to help you determine how much life insurance you need.
Next, decide the policy term you want. How long do your family and loved ones need money from a life insurance policy? For example, if you want your children to enter college in 12 years, you’ll want at least a 15-year policy.
See also Long policy terms for zero but price comparison on term length. If it suits your financial means it won’t hurt to extend your term so that if the debt grows or isn’t paid off as quickly as you expect, the life policy is for a few more years.
For example, if you don’t own a home now but plan to buy a home in the coming years with a 30-year mortgage, it might make sense to broaden your search to a 15- to 30-year term length.
Once you have the policy amount and policy length determined, you are ready to compare life insurance quotes.
When shopping for quotes for a $1 million term life policy, check to see if a medical exam is required. Generally, life insurance companies want you to undergo a medical exam to understand your health and determine your life expectancy.
However, recently no-test life insurance has become more widely available. Note, however, that if you are not in very good or excellent health, you may not qualify for these instant policies. Also, not all no-exam companies offer a $1 million policy.
The following information is helpful to have on hand when you shop for a life insurance rate quote:
- Height and weight
- Family medical history for immediate family, ie parents and siblings
- Knowledge of personal medical information, past and present health
- Medications, both current and past
- Lifestyle information, such as smoking and alcohol consumption
- Dangerous hobbies, such as piloting schemes and scuba diving
- Future plans to travel outside the United States
Be sure to be truthful. Misrepresentations during the application process and void the policy in future.
During the buying process, check reviews of the life insurance companies you are considering to make sure they have a good reputation and the financial strength to pay if a claim is made.
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