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How Much Does A Million Dollar Life Insurance Cost?

How Much Does a Million Dollar Life Insurance Cost?

Do you think million dollar term life insurance means too much insurance?

As a certified financial planner, I see underinsured people every day.

What am I telling them?

One million dollar life insurance, while the minimum coverage required for a typical middle class household, is affordable.

That may sound like an exaggeration, but if you crack the numbers – just like we do a little – you will find that a million dollar policy can be very reasonable.

The good news is that term life insurance isn’t nearly as expensive as most people think.

What makes the term even better is that larger policies cost less per thousand than smaller policies. The premium for a $ 1 million policy may be only slightly higher than for a $ 500,000 policy.

In this resource:

Do You Really Need A Million Dollar Term Life Insurance?

Probably, but let’s find out. A general rule of thumb that many life insurance companies use is around ten times your income. This can be minor if you are young as you may want to provide enough for your family to replace your income for 15 years or more.

Today, $ 1 million is the new base for a prime breadwinner’s life insurance. Anything else could affect your family financially.

Typical obligations to add when calculating the amount you need

Here is a list of all the different commitments you might want in the event you die prematurely.

  • Your income (and for how many years)
  • Your final expenses
  • Any debts that you might want to pay off
  • Future commitments like college for kids
  • Other obligations like business
  • Typical items that you can deduct when calculating the amount needed
  • Current life insurance
  • Assets (like cash or stocks) that you might use in lieu of life insurance

After you have an idea of ​​these obligations, enter them into this life insurance calculator to find out if you need a million dollar policy.


Select a policy

According to Policy Genius, the average cost of 20-year life insurance at $ 1,000,000 for a 35-year-old male is $ 53 per month. However, their rate depends on the following factors.

Factors Affecting Your Rate:

  • Your age
  • Your Health
  • your gender
  • Your Hobbys
  • Your coverage amount and contract term

Where to start

The best and easiest place to start is online. I recommend two or three insurers vying for your business to make sure you get the best rate and coverage.

To see how cheap life can be, select your state on the map below to be matched instantly with the best life insurers.

Factors That Affect How Much You Need

Let’s look at the individual components, which can quickly add up to over a million dollars.

Income replacement – providing your family with the basic living expenses

It can get a little intimidating here. Even if you have a modest income, you may need nearly $ 1 million to replace that income after your death.

The common belief in the insurance industry is that you should get life insurance that is 10 to 20 times your annual income.

If you’re making $ 50,000 a year, that means a policy between $ 500,000 and $ 1 million.

The complication today is that with interest rates this low, that too may not be enough.

For example, if you have a policy for $ 1 million that could be invested 5% per year, your family could live on interest, which comes to $ 50,000 per year, for the next 20 years.

That would leave the original $ 1 million to cover other expenses intact. However, with today’s microscopic interest rates, there is no way you can get a guaranteed 5% return on your money, especially not for 15 or 20 years.

That brings us back to simple math: multiply your annual income by the number of years that your family’s living expenses need to be met. That alone can require $ 1 million life insurance.

Your final expenses

Here we start with the basics – closing your final affairs.

This includes funeral expenses and any remaining medical expenses. A reasonable estimate for a typical funeral is $ 20,000.

Crazy right? You can get funeral insurance to cover only the most basic end costs.

Debt that you want to pay off for your family

The debt burden in the United States is high and the debt can weigh on the remaining family members. Many life insurance customers make sure that they can pay off most of their debts with the policy.

Medical debt
Medical costs are a serious variable. Even if you have excellent health insurance, you are likely to be left with unpaid medical bills after your death. This has to do with co-payments, deductibles and co-insurance provisions.

Together they can add up to many thousands of dollars. But where things get really complicated is when you die of an incurable disease.

For example, if you have an illness that lasts for several years, you could face a number of costs that are not covered by insurance. This can include the cost of personal care and even experimental treatments.

mortgage
A home may be a great asset, but it is also often a homeowner’s largest debt. The average mortgage balance in the US is around $ 202,000, according to Experian data. So you can easily get life insurance to pay off these debts and relieve your loved ones of a monthly mortgage payment.

Personal debt
Credit card and other personal debts are among the most expensive obligations, with interest rates in excess of 20% in some cases. Make sure that you have enough to cover this very expensive debt.

Future commitments for your family

Below is a selection of the main expenses your family will likely incur annually or at some point after your death.

University
College costs continue to skyrocket. The Ministry of Education estimates that four-year tuition fees at public universities have increased by an average of 5% per year and have far exceeded the inflation rate. If you have one child attending a state public school, a second in an extra-state public school, and a third in a private university, the total spend is $ 416,560.

  • Annual State Public College Cost: $ 20,770 ($ 83,080 for four years)
  • Annual cost at a public university out of state: $ 36,420 ($ 145,680 for four years)
  • Annual private college cost: $ 46,950 ($ 187,800 for four years)

transport
Vehicles and other modes of transportation make up another large sum. Unfortunately, as electronics and safety features increase, the average cost of a new car continues to rise.

Health insurance
If your family relies on your work for health care, be aware of this. The average health insurance premium for a family is $ 19,616. That’s an additional cost of under $ 2,000 per month. These costs will only increase and the need could last for years.

Other commitments that you may need to cover

So far we have described the financial obligations that could affect a typical household.
However, there may be certain situations that lead to less obvious commitments.

Business owner
For example, if you are a business owner, you may have debts or other financial obligations that must be paid after you die.

Even if no one in your family is qualified or interested in taking over your business, repayment of these obligations may be required in full to enable the business to be sold.

Real estate investor
Another option is that you are a real estate investor.

If your properties are heavily in debt, additional insurance proceeds may be required to keep the properties up for sale or even to pay off the existing debt to free up cash flow for income.

You may even need extra funding when caring for an extended family member such as an aging parent.

These are just a few of the many choices of expenses that must be covered by insurance revenues.

Factors Affecting Life Insurance Premium Rates

Before we move on to specific life insurance offerings, let’s first consider the factors that affect term life insurance premiums.

Age

This is usually the most important premium factor. The older you are, the more likely you are to die within the life of the policy.

health

This is close to a second and why it is so important to apply for a policy as early as possible. The premium rates are literally increasing every year.

If you have health problems that can affect mortality, such as diabetes or high blood pressure, your premiums are higher. This is another compelling reason to apply while you are young and in good health.

It’s not that guidelines aren’t available for people with health problems, just that if you don’t have them, they’re cheaper.

Contract term

A 10-year term has a lower premium than a 20-year term, which is lower than a 30-year term. The shorter the term, the less likely it is that the insurance company will have to pay a claim before it expires.

Policy size

The size of the guideline matters, but not the way you might think.

Yes, a $ 1 million policy costs more than a $ 500,000 policy. But it won’t cost twice as much.

The bigger the policy, the lower the cost per thousand.

When the amount of the death benefit is taken into account, the larger policy is always cheaper.

Work, hobbies and habits

For example, certain jobs are more dangerous than others (think police officers versus librarians). Deep sea diving is a higher risk than golf. And smoking is the only activity guaranteed to increase your rewards significantly.

With this information in mind, let’s dive into the term life quotes.

Why term life insurance instead of whole life?

Any discussion of life insurance should include a comparison of total life and term life insurance coverage. After all, both products can be immensely valuable in the right situation, but one product (entire lifespan) costs considerably more than the other.

Most of the time the debate in favor of term life insurance is settled on the basis of cost alone. After all, life insurance can easily cost 10 times the coverage that you can get with term insurance.

With this in mind, life insurance and other life insurance policies in the form of investments can be valuable in terms of the cash value that you can build over time. Life insurance also offers your heirs a fixed amount of benefit that is valid for your entire life. However, the cost of your rewards is guaranteed to remain the same.

The cash value of an entire life insurance policy also grows deferred for tax purposes, and you can borrow against this amount if you need a loan. In addition, many life insurance companies from reputable providers also pay dividends in good years, which can be substantial.

Why young families choose risk insurance

The problem with whole life and other similar policies like universal life is the fact that the premiums can be exorbitant for the amount of coverage you may need.

A couple with young children is a good example, as they may need a $ 1 million or more policy to provide income protection for their years of work and have money to spare for tuition and other expenses.

Expenses are already high for young families.

This includes the cost of food for a family, childcare, heavy health care utilization, and the seemingly endless demand for clothing, furniture, and even entertainment as the children grow up.

As you can see in State Farm’s cost comparison below, there isn’t enough room in the typical family budget to afford the type of life insurance you need. A 40-year-old mother and breadwinner in excellent health would pay $ 80.09 per month for term life insurance that lasts for 20 years, while an entire life insurance policy would cost the same amount $ 1,266.69 per month (or $ 14,560 per year) would.

This is a classic situation in which risk insurance serves as a rescue. The family can afford to buy the amount of insurance they need at an affordable price, while it is difficult to pay for permanent life insurance of the same amount.

Equally important for people of all ages and in all circumstances is that the additional funds that are not spent on insurance premiums can be invested to gradually improve your financial situation.

So risk insurance works best for most people.

Examples of life insurance costs

As you will notice, each table contains a lot of information. Knowing that everyone is in a different situation, I wanted to make sure I had offers for almost every possible situation.

I have included offers for a term of 30 years, 20 years and 10 years. If you use tobacco, I have also included some quotes from life insurance for smokers.

30 year term quote One million dollars

If you think a million dollars is expensive, you will quickly find that a 25-year-old man in good health costs only $ 645 a year, a 35-year-old costs $ 795 a year.

On a monthly basis, that’s almost nothing!

AGE SEX COMPANY 1 COMPANY 2 COMPANY 3
25th MALE BANNER LIFE
$ 645
NORTH AMERICAN CO.
$ 645
TRANSAMERICA
$ 650
25th FEMALE AMERICAN GENERAL
$ 514
NORTH AMERICA CO.
$ 515
SBLI
$ 520
35 MALE BANNER LIFE
$ 795
GENWORTH FINANCIAL
$ 804
ING
$ 808
35 FEMALE SBLI
$ 640
AMERICAN GENERAL
$ 694
GENWORTH FINANCIAL
$ 695
45 MALE BANNER LIFE
$ 1,885
GENWORTH FINANCIAL
$ 1891
AMERICAN GENERAL
$ 1,894
45 FEMALE SBLI
$ 1,450
BANNER LIFE
$ 1,455
AMERICAN GENERAL
$ 1,456

20 year term quote One million dollars

There is a sharp fall in prices between 20 and 30 years, as insurers have to worry less about life expectancy.

For many people, a 20 year policy will get them exactly where they want to be in life when the policy expires.

AGE SEX COMPANY 1 COMPANY 2 COMPANY 3
25th MALE AMERICAN GENERAL
$ 414
BANNER LIFE
$ 425
SBLI
$ 440
25th FEMALE AMERICAN GENERAL
$ 354
SBLI
$ 360
BANNER LIFE
$ 365
35 MALE SBLI
$ 450
BANNER LIFE
$ 455
NORTH AMERICA CO.
$ 485
35 FEMALE SBLI
$ 390
AMERICAN GENERAL
$ 404
BANNER LIFE
$ 405
45 MALE BANNER LIFE
$ 1,155
SBLI
$ 1,160
GENWORTH FINANCIAL
$ 1,173
45 FEMALE SBLI
$ 880
BANNER LIFE
$ 895
TRANSAMERICA
$ 930

10 year term quote One million dollars

Again, if you lose another 10 years on the term, you’ll get a $ 200 reduction in annual premium.

If your life insurance agent doesn’t give you all of these term options and is only focused on the death benefit, you will need another agent.

AGE SEX COMPANY 1 COMPANY 2 COMPANY 3
25th MALE SBLI
$ 260
BANNER LIFE
$ 285
MINNESOTA LIFE
$ 290
25th FEMALE SBLI
$ 230
BANNER LIFE
$ 245
ING
$ 248
35 MALE SBLI
$ 270
BANNER LIFE
$ 295
MINNESOTA LIFE
300 dollars
35 FEMALE SBLI
$ 240
BANNER LIFE
$ 255
ING
$ 258
45 MALE BANNER LIFE
$ 585
TRANSAMERICA
$ 630
GENWORTH FINANCIAL
$ 637
45 FEMALE SBLI
$ 520
BANNER LIFE
$ 525
ING
$ 528

Smoker Term Life Quote One Million Dollars

For all smokers out there – be careful! The cost of your life insurance balloons as you will see here. If you are considering giving up the habit, now is the time.

Some life insurance companies will give you a lower price if you complete a recognized smoking cessation program and have not been smoking for at least two years.

It won’t help your immediate situation, but if you see the rates of rewards below you may agree that it is something to work towards!

AGE SEX COMPANY 1 COMPANY 2 COMPANY 3
35 MALE North American Co.
$ 3595
SBLI
$ 3630
MetLife
$ 3639
35 FEMALE North American Co.
$ 2555
Transamerica
$ 2,720
Prudential
$ 2,765

Bottom line: cover yourself

Getting a $ 1 million life insurance policy isn’t as expensive as most people think. You can get quotes from several top life insurers today by selecting your state on the map above.

Even those who opt for the more expensive permanent life insurance will often be surprised by the price.

Either way, you can get that larger coverage and still not break the bank. But get your policy now while you are young and in good health.


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