Million Dollar Life Insurance Policy

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A million dollar life insurance policy may seem excessive, but when you consider your family’s needs over the next decade, a million dollars may not provide enough coverage.

That’s why getting a million dollars or more in term life coverage has become so normal. If you need this much coverage, you should be able to buy it.

And you may be surprised how affordable the coverage can be, especially if you’re young and healthy.

What Is A Million Dollar Life Insurance Policy?

A 1 million dollar life insurance policy works like any other kind of life insurance.

Your policy creates a contract between you and your insurer: In exchange for paying your regular premium payments, your insurer promises to pay your loved ones a million dollars if you die.

Your million dollar death benefit would be paid as a tax-free sum to your beneficiary. You’d choose your beneficiary when you bought the policy. Most people choose their spouse, a parent, or a grown-up child to serve as their beneficiary.

The cost of life insurance — whether it’s for a million dollars or just $25,000 in coverage — depends on your life expectancy and other details about your policy. Whether you bought a 20-year term life insurance policy or some kind of permanent coverage would make a huge price difference.

We’ll explore these details below since they will help determine how much you would pay for a million dollars in life insurance coverage.

How Does A Million Dollar Life Insurance Policy Work?

Life insurance policies work the same regardless of their size. Higher value policies just require higher premiums.

Life insurance policies of any size can be complex and confusing, so let’s break down some of the basics:

What Does Life Insurance Cover?

Your life insurance coverage could replace your income, pay your funeral expenses, and cover any unpaid bills you might leave if you died unexpectedly. Private student loans, credit card bills, the mortgage — life insurance can pay off these bills rather than leaving the burden for your family.

You may expect your health insurance to cover medical expenses even after you died, but health care policies pay only a portion of your bill, and your family would still be responsible for the rest.

Besides medical bills, your policy can also cover funeral or other end-of-life costs. These expenses will vary depending on where you live and your family’s customs (some traditions require added cost).

On average, funerals cost about $10,000, but some exceed $20,000. Again, a life insurance payout could prevent your family from having to come up with this money.

Income Replacement

You might be thinking your income doesn’t come close to one million dollars so why would you need a million-dollar life insurance policy?

To answer this question, consider how much money you would need to replace your income for 10 years, as many financial experts advise.

If you earn $100,000 a year, 10 years of income would put you right at $1 million. And this is just a basic guideline when you’re buying a term life policy. The specifics of your life could require even more coverage.

For example, will your children attend a private college? You might need even more coverage. The same could be true if your future dreams include buying a vacation home or renovating your home.

Business owners may also have additional debts or financial obligations to consider. Likewise, policyholders who care for their elderly parents may also want more coverage.

Here’s another factor to consider: interest rates. If you died and your family claimed your policy’s death benefit, they could decide to invest the money rather than spend it.

If you had $1 million in life insurance coverage — and if your family invested it and earned a 5 percent return — they could generate $50,000 a year on the investment.

Of course, during times of low-interest rates, you’d need more life insurance coverage to generate the same $50,000 in interest income off the life insurance payout.

How Much Does A Million Dollar Life Insurance Policy Cost?

Only the underwriting process will generate the actual cost of your policy.

But here are some ballpark numbers to give you an idea:

Age Gender 30 Yr Term 20 Yr Term 10 Yr Term Guaranteed Universal
30 Female $48/mo $28/mo $20/mo $365/mo
45 Male $167/mo $92/mo $50/mo $560/mo

Keep in mind these costs would be much higher for smokers or anybody with a pre-existing health condition. As you can see, term life insurance provides, by far, the best value.

Calculator: Your Instant Quote

This tool will give a significantly more accurate view of how much a million-dollar policy might cost you compared to the general samples.

You’ll get an estimated quote without submitting any information. Then, when you’re ready, complete your no-obligation application to get your final quote before purchasing.

Do I Need a 1 Million Dollar Life Insurance Policy?

Here’s some good news: increasing the face amount of coverage doesn’t increase your monthly premium as much as you might expect.

So how do you find the right coverage amount?

A good rule of thumb is to buy 10 to 20 times your income in life insurance coverage, but your exact coverage should be customized to fit your situation.

Customizing Your Coverage

Your exact coverage should consider your earnings, plus:

  • Your number of dependents.
  • Your dependents’ future education plans.
  • Any additional financial obligations, such as business debt.
  • Your end-of-life or final expenses (typically $7,000 to $10,000).
  • Your family’s ongoing living expenses.
  • Your future dreams: Home ownership, a vacation home, charitable giving, etc.

After doing the math, you may discover you don’t need a million-dollar policy after all. If you’re a lower earner or you don’t have any children, $500,000 or less in coverage may be just fine.

Who Needs $1 Million in Life Insurance Coverage?

On the other extreme, if you:

  • Are a high-earning breadwinner with an expensive lifestyle to maintain.
  • Would like to leave a large inheritance.
  • Face an estate tax and need high liquidity.
  • Are a partner in a small business…

…you may quickly discover you need a $5 million dollar term life insurance policy – or even more.

Million Dollar Life Insurance as Philanthropy

Some people with philanthropic hearts like to name a charity as the beneficiary of their life insurance policies.

Giving life insurance can net larger donations, and your estate could get a tax break — and the charity might get some extra publicity. Your loved ones could reserve part of your million dollar term policy for charity.

Or you could get a smaller whole life insurance policy whose accumulated cash value could fund a charitable contribution.

What Affects The Cost of a Million Life Insurance Policy?

Numerous factors affect life insurance premiums whether you’re buying a million dollars or just $25,000 in coverage. These factors affect your life insurance policy cost:

  • Age: Younger shoppers can access the lowest rates.
  • Health Status: Healthier applicants can pay less, especially when they take a health exam to document their vital signs and lab results. Many health classes would never qualify for a $1 million or $2 million dollar term policy.
  • Policy Term Length: Longer terms mean higher premiums. A 30-year term would dwarf the cost of a 10-year term. Your coverage would expire at the end of your term.
  • Policy Type: As I said above, term policies cost significantly less than permanent policies.
  • Policy Size: More coverage costs more in premiums.
  • Occupation: Dangerous jobs put you at higher risk of an early death, and your insurance underwriters will respond to this risk by charging higher life insurance rates.
  • Hobbies & Habits: As with your profession, your hobbies and habits can also increase premiums when they’re more dangerous. Smokers, for example, will pay a lot more.

Let’s look deeper at these issues to learn how you can save on million dollars or more of life insurance.

Age and Health

Older people pay more when they get new life insurance coverage. Why? It’s basic statistics: Older people are more likely to die sooner, and life insurers base premiums on their likelihood of paying your policy’s claim.

Health is another important factor for the same reason. Applicants with diabetes, COPD, high blood pressure, or other potentially life-shortening conditions will pay higher premiums because they’re more likely to cost the insurer a claim. In fact, large policies could be off limits for shoppers in these health classes.

For million dollar policies, age is even more important because it affects the multipliers life insurance companies use to determine your eligibility.

Anyone younger than 40 can usually buy coverage worth 30 times their annual income; applicants older than 60 can buy coverage worth only 15 times their income.

This massive difference can directly impact your ability to qualify for $1 million or more in coverage.

Policy Term, Amount of Coverage, and Type

The nature of your policy will also affect your cost

Shorter terms mean lower costs because once again, your insurer takes less risk of a payout.

More coverage costs more too, naturally. A policy with $1 million in coverage will cost more than the same kind of policy with only $100,000 in coverage.

However, the million dollar policy won’t cost 10 times more even though it’s 10 times larger. This can help justify buying a larger policy: You’d get more coverage for your money.

And, as I said above, your policy type will make a huge difference. Finding the best term life insurance policy for you makes it more affordable for most people, especially younger and healthier applicants. Older applicants often need types of life insurance that do not offer a million dollars or more in coverage.

Occupation

As you can already tell, insurers worry a lot about risk. There’s an entire profession — insurance underwriting — dedicated to assessing the risk your policy would present.

When you apply for coverage, your occupation will help underwriters assess the risk your coverage would present.

Roofers, deep sea anglers, aircraft test pilots — these kinds of jobs will likely increase your premiums because statistics show higher rates of on-the-job fatalities.

This shouldn’t be too surprising. But here’s one that might be more unexpected: Traveling salespeople typically pay higher premiums. Why? Because traveling so much increases the likelihood of being in a fatal car crash.

Underwriters from the best companies spend a lot of time researching these kinds of questions so they can charge appropriately for your coverage and keep other policyholders from subsidizing your risk.

Hobbies and Habits

Your hobbies and habits will be relevant too. The insurance company probably won’t care if you knit scarves in your free time or go play snooker every weekend. But if you’re a horse rider or SCUBA diver, your insurer might reconsider your rates.

As for habits, activities like smoking vastly increases your life insurance premiums.

If at all possible, quit smoking before you buy life insurance. Non-smokers pay a fraction of the average cost smokers pay.

Some companies offer a lower rate for anyone who begins a smoking cessation program.

Best Million Dollar Life Insurance Companies

So you know how much coverage to buy, and you have a pretty good idea of how much you’ll pay in premiums.

The next decision may seem even tougher: Which company should provide your million dollar policy?

With hundreds of life insurers competing for your business — and using their industry-specific jargon to confuse you — it’s normal to feel a little overwhelmed.

Here are some of the best providers of million dollar life insurance. I’d recommend getting life insurance quotes from any or all of these providers:

Haven Life: Best Overall

For fast and easy coverage, Haven Life is perfect.

You can complete the entire process online – you don’t even need a medical exam if you’re 45 or younger and have a clean health history.

Haven Life sells policies from MassMutual, one of the most established insurers in the market. So you’re getting the best of both worlds: traditional stability in a digital environment.

Haven has earned several accolades, including a top score on the Humans Rights Campaign Corporate Equality Index and the best rating for financial strength and claims-paying ability.

Rates start at less than $20 a month for million-dollar policies. You can apply for life insurance coverage up to $3 million.

To determine your eligibility, Haven Life underwriters will consider your income, the cost of health care for a non-working partner, your debts, the cost of children’s education, Social Security, child care, and funeral expenses.

To be eligible, you’ll need to be:

  • A U.S. Resident
  • Between 18 and 64 years old
  • Not in the military

You can’t use the policy to replace a previous policy or for a business, and Haven offers only individual term life insurance – no group life or permanent life options.

Next Steps:

Banner Life is an offshoot of Legal & General Group, a multinational insurance company. Banner uses different life insurance agents to sell its products. Men tend to spend a lot more money on life insurance than women, so Banner caters its coverage specifically towards men.

Unlike Haven Life, Banner lets you choose between term insurance (which lasts for a set number of years) and universal life insurance (which can last permanently). Banner also offers numerous riders, including coverage of children and the ability to access your death benefit before you die.

Your application can be approved over the phone with no medical exam or doctor’s records if you meet specific criteria.

Banner Life shines is in its treatment of most health conditions. For example, smokers who quit after buying coverage could still requalify for lower rates several years into their coverage. Most other companies lock in a premium based on your current tobacco status.

Banner Life does not sell policies in New York but shoppers can find very similar coverage with William Penn Life Insurance, another subsidiary of Legal & General.

Next Steps:

MetLife: Best for Permanent Life Options

You’ve heard of MetLife.

This huge multinational insurer offers both term life insurance and various permanent life insurance options, including universal life insurance.

There’s also a survivorship life insurance policy, which covers more than one life. Whatever you’re looking for, MetLife probably has it.

Chances are MetLife will be selling personal policies through Brighthouse, its subsidiary.

Next Steps:

AIG: Best for Diabetics

AIG, another big name in the business, also has a full stable of products, from term to whole to universal life.

Rates start from just $14 a month for a $250,000 term life insurance plan, although, you’d need to be young and in excellent health to get such a low payment.

AIG is particularly well suited for anybody who has recently lost weight or been diagnosed with diabetes, but less than ideal if you have high cholesterol or a family history of heart disease or cancer.

Next Steps:

PolicyGenius: Best for Price Comparisons

Comparison shoppers will like PolicyGenius, especially if you’re not in perfect health.

Just to be clear: PolicyGenius does not provide insurance directly. Instead, the service helps you compare quotes from most of the big-name insurance companies online, making it fast and efficient to find your best rate.

PolicyGenius has great educational content, too. You can learn about the terminology used to describe insurance policies, and there’s also an Insurance Checkup tool to check whether you have the right insurance and coverage for your needs.

Next Steps:

Prudential: Best for Multi-Million Dollar Policies

Prudential Financial offers term policies with $10 million or more in coverage. You’d need to prove why you need so much coverage. But if you need this much life insurance, you can buy it from a company like Prudential.

To buy this coverage you’d need to work with a financial advisor who is licensed to sell Prudential policies.

Next Steps:

Am I Eligible For A Million Dollar Life Insurance Policy?

Insurance companies use a simple formula of combining your age and income to determine your eligibility.

Typically, underwriters multiply your annual salary anywhere between 10 to 20 times to figure out how much life insurance coverage is truly needed. If you make around $50,000 a year, a 1 million dollar policy could be just what you need.

After checking out your income, your age is also analyzed. The general rule of thumb is–the younger you are, the higher the coverage and cheaper the rates.

As long as you have a job and are in good health, don’t sweat getting the protection you need.

How Big a Life Insurance Policy Should I Take Out?

If you’re still unsure exactly how big a policy you need, you could check the life insurance needs calculator on Quotacy. Just enter some basic information about your assets, obligations, and future needs and Quotacy will suggest a coverage amount.

These tools can be a lot of fun to play with, and they’re a great resource. Just remember the calculator doesn’t include the cost of college tuition.

If you find you need a million dollars or more in life insurance coverage, you should be able to find it. If you’re a non-smoker who’s in good health, you should have several affordable choices for coverage.

The key is to buy coverage before you need it. When you lock in a decent rate while you’re still young, you’ll thank yourself later on in life.

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