If you have found this blog post, then you are probably thinking about purchasing a million dollar life insurance policy, and you are wondering; What does a million dollar life insurance policy cost?
The good news is you have come to the right place. We will go over why you need a million dollar life insurance policy, what it costs, and which companies are the best to work with.
We know that a million dollar life insurance policy may seem like a lot, but in reality many people need this amount, maybe more, to support their loved ones needs in the event of a premature death.
According to LIMRA; Only 59 percent of Americans have life insurance, and about half of those with insurance are under-insured. Another problem is that nine million households just have group life insurance.
Why You Probably Need a Million Dollar Life Insurance Policy
When it comes to choosing the right amount of life insurance, many factors will come into play such as:
- Debt, such as a mortgage
- Children
- Income replacement
Cost of Living Statistics
- The average cost of college tuition and fees for the 2019-2020 school year was $37,430 at private colleges
- In 2020, the average cost of a funeral was $10,750
- The average cost of a home in February 2020 was $200,000
- In 2020, the average cost of childcare in America was $15,000
- In 2020, the average American household credit card debt in the U.S. is $17,500
Most people buy life insurance to protect there families who will rely on their future income for financial support. This is why income replacement is reason most people purchase a million dollar life insurance policy.
You may be wondering what we mean by income replacement. The concept behind income replacement is to have enough life insurance inforce that would provide your loved ones with a similar income in the event you pass away unexpectedly. The norm is considered 10X your annual salary. This may seem like a lot but check out the example below.
Example
Here is a typical scenario for a successful family:
- $150,000 primary income
- Stay at home spouse
- Young Children
- Mortgage and other debts
How Much Life Insurance Do You Need?
- First you will want to calculate the death benefit based on enough income to provide for your loved ones. Remember the norm is 10X your salary.
- Next, figure out what your debts are such as, your mortgage, credit card debt, business loans, and final expenses.
- Add these those figures together and you will get an estimate of how much life insurance you need.
In this scenario you would need:
- $1,500,000 Death Benefit to cover your income ($150K X 10 years)
- $250,000 Mortgage
- $25,000 for Final Expenses and Minor Debt
That’s $1,775,000 of death protection if you want to cover your loved ones.
As you can see, needing a $1,000,000 life insurance policy is just not for the super wealthy. Now you probably are figuring out you may be under-insured and want to look at how much a $1,000,000 life insurance policy would cost.
What Does a Million Dollar Life Insurance Policy Cost?
Since you’ve probably figured out you may be under-insured and are wondering “What does a million dollar life insurance policy cost?”
The cost of a million dollar life insurance policy is determined by a number of different variables. The first variable is which type of life insurance to purchase. You will have 2 to choose from.
Term Life Insurance
Term life insurance is the least expensive form of life insurance available. It is a pure death benefit protection policy, meaning it doesn’t build up any cash value. Term life comes with “term” periods, usually in increments of 10, 15, 20, 25, or 30 years. The premium is guaranteed for the “term” period chosen.
At the end of the guaranteed “term” period, most companies will let you extend your term on an annual renewable basis, but be wary, the premiums will increase significantly.
Million Dollar Term Life Insurance Rates By Age
Rates based on 20 year term-Preferred Monthly Rates
Permanent Life Insurance
Permanent Life Insurance is an insurance policy that last your entire life. Premiums are usually guaranteed (depends on the type of policy you choose) and all build up cash value.
Permanent life insurance is broken down into two types:
- Whole Life Insurance
- Universal Life Insurance
What is Whole Life Insurance?
Whole life is a permanent product that last the lifetime of the insured. Premiums and death benefit are guaranteed to age 120.
Whole life insurance also comes with guaranteed cash value accumulation that can be borrowed against if needed. Some whole life policies, referred to as participating whole life, also offer a dividend option.
You can use the dividends to buy extra life insurance, let them accumulate, or help pay the premium. Dividends are not guaranteed.
Read more about Whole Life Insurance here.
What is Universal Life?
Universal life insurance is also a permanent product, but that is about all that it has in common with whole life. Universal life insurance does offer cash value accumulation but it is not guaranteed like whole life.
Universal life offers lifetime coverage with flexible premiums. There are 3 types of universal life insurance offered. They are:
Read more about Universal life Insurance here.
Million Dollar Permanent Life Insurance Rates By Age
Rates are Preferred Non-Tobacco/ Male
As you can see, a million dollar term life policy is going to be cheaper than a million dollar permanent policy.
Now that you have an idea of how much a million dollar life insurance policy costs, it’s important to make sure you work with an independent agent to help you find the best company to fit your needs.
If you have any questions please don’t hesitate to contact us or use one of our free life insurance quoters to see what a million dollar life insurance policy would cost you.