How Much Is One Million Dollars of Life Insurance Coverage?
Let’s face it. When considering your life insurance cost, large policies cost money. Being a millionaire is something most people only dream of becoming. Most never realistically think they’ll have a million dollars, so why are million dollar+ life insurance policies so popular? And how much does a million dollar policy for life insurance cost? Do you need that much coverage?
Can Anyone Get a Million Dollar Life Insurance Policy?
Not everyone can justify owning one million dollars worth of life insurance. Insurance companies require a financial justification for large policies because life insurance is designed to replace wealth, not increase it. However, a million dollars in life insurance coverage is actually fairly common.
Purchasing a million dollar life insurance policy doesn’t seem far-fetched when you consider how much it costs to replace your income, pay off the house, send children to college, and relieve your family’s financial burdens after you’re gone.
» Compare: Instant quotes for $1 million of life insurance coverage
How Much Does a Million Dollar Life Insurance Policy Cost?
First, let’s look at a common situation in which one million dollars’ worth of life insurance makes sense and then we will breakdown the costs.
Example:
John and Jane Smith each make approximately $60,000 annually. They have four children and live in a five-bedroom home with a $400,000 mortgage. If either John or Jane died, their wish would be to ensure the children be able to stay in their childhood home and not have to move out of their school district. Essentially, disrupt their lives as little as possible upon the death of a parent.
When planning to buy life insurance, also take college costs into consideration if that is something you plan on providing. College tuition costs for four children can range from an average total of $154,400 to $535,660, depending on the state and whether it’s public or private. Taking tuition into account, John and Jane would be suited to buying $1,200,000 in life insurance each.
Using the life insurance needs calculator on Quotacy, entering John and Jane’s information suggests that a $1,200,000 policy would be a good start to ensure that the mortgage is able to be paid off, to replace the lost income, cover a funeral, and pay for children’s college tuition. It does not take into consideration any current savings they may already have or current life insurance policies (if any). These numbers would lower the need dollar amount.
If you have a family and make a decent income, owning one million dollars of term life insurance is actually not that far-fetched. This is because term insurance is quite affordable, even one million dollars’ worth.
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So, now that we know John and Jane could each use at least a $1M term life insurance policy, let’s breakdown how much this would cost them. For example’s sake, we don’t know how old John and Jane are nor do we know their health status. In the expandable box below, I’ll illustrate the cost of a $1M policy across a couple ages and the typical non-smoker risk classes (Preferred Plus being the best possible class offered.)
Example Pricing for a $1,000,000 Life Insurance Policy for Males and Females Age 40 and 45
| Cost of a One Million Dollar Term Life Insurance Policy | |||
| Male, Age 40 | |||
| Risk Class | 20-Year Term Monthly Premium | 25-Year Term Monthly Premium | 30-Year Term Monthly Premium |
| Preferred Plus | $51 | $79 | $95 |
| Preferred | $65 | $94 | $112 |
| Standard Plus | $91 | $131 | $157 |
| Standard | $106 | $155 | $185 |
| Cost of a One Million Dollar Term Life Insurance Policy | |||
| Female, Age 40 | |||
| Risk Class | 20-Year Term Monthly Premium | 25-Year Term Monthly Premium | 30-Year Term Monthly Premium |
| Preferred Plus | $44 | $63 | $77 |
| Preferred | $53 | $77 | $90 |
| Standard Plus | $71 | $102 | $123 |
| Standard | $83 | $120 | $144 |
| Cost of a One Million Dollar Term Life Insurance Policy | |||
| Male, Age 45 | |||
| Risk Class | 20-Year Term Monthly Premium | 25-Year Term Monthly Premium | 30-Year Term Monthly Premium |
| Preferred Plus | $89 | $128 | $153 |
| Preferred | $107 | $153 | $183 |
| Standard Plus | $143 | $206 | $253 |
| Standard | $169 | $249 | $298 |
| Cost of a One Million Dollar Term Life Insurance Policy | |||
| Female, Age 45 | |||
| Risk Class | 20-Year Term Monthly Premium | 25-Year Term Monthly Premium | 30-Year Term Monthly Premium |
| Preferred Plus | $70 | $97 | $118 |
| Preferred | $81 | $112 | $133 |
| Standard Plus | $110 | $153 | $179 |
| Standard | $129 | $181 | $213 |
As you can see in the tables above, even for individuals in their 40s, one million dollars’ worth of term life insurance is not that expensive considering how much your loved ones would receive if you died too soon.
Had John and Jane planned ahead and purchased a 30-year $1M term policy when their first child was born, they would be paying much lower premiums. Take a look at the table in the expandable box below.
Example Pricing for a $1,000,000 Life Insurance Policy for Males and Females Age 30
| Cost of a One Million Dollar Term Life Insurance Policy | ||
| 30-Year Term Length | ||
| Insured at 30 Years of Age | ||
| Who | Risk Class | Monthly Premium |
| John Smith | Preferred Plus | $56 |
| Preferred | $71 | |
| Standard Plus | $91 | |
| Standard | $117 | |
| Jane Smith | Preferred Plus | $45 |
| Preferred | $57 | |
| Standard Plus | $80 | |
| Standard | $90 | |
A one million dollar life insurance policy may not be necessary for everyone. But, on the other hand, it might not be enough depending on your family situation. If you are not sure how much life insurance you need, play around with our needs calculator. It will point you in the right direction. From there you can run a term life insurance quote.
Using our DIY quoting tool makes getting life insurance quotes easy and you can adjust the term length and coverage amount as much as you need until you find a policy that fits well in your budget. Did we mention you don’t need to give up any contact information to run a quote? Running life insurance quotes has never been easier.
» Learn more: How Much Life Insurance Coverage Do I Need?
Note: Life insurance quotes used in this article are accurate as of August 6, 2020. These are only estimates and your life insurance cost may be higher or lower.
Watch the One Million Dollars in Life Insurance Video
Listen to the video transcript
Read the video transcript
Welcome to Quotacy’s Q&A Friday where we answer your life insurance questions. Quotacy is an online life insurance agency where you can get life insurance on your terms.
I’m Jeanna and I’m Natasha.
Today’s question: How much is one million dollars’ worth of life insurance?
Most people never realistically believe they will ever become millionaires. But owning a million dollars’ worth of life insurance is actually common.
Purchasing a million-dollar life insurance policy doesn’t seem far-fetched when you consider how much it costs to replace your income, pay off the house, send your kids to college, and relieve your family’s financial burdens after you’re gone. Now, you can’t just go buy a one million dollar life insurance policy just because. You need financial justification to do so.
For example, if you’re an 18-year-old working part-time at Starbucks while you’re enrolled in college full-time, you won’t qualify for a one million dollar life insurance policy.
Life insurance is designed to replace wealth, not increase it. The life insurance companies want to make sure you aren’t worth more dead than alive. Everyone has an insurability limit. This is the total amount of life insurance any person can be insured for across all policies at any one time.
The general rule for most people is that if you’re 40 years old or younger, your life can be insured for up to 30 times your current annual income. Every ten years after age 40, that multiplier is reduced by five.
| Life Insurance Limits by Age | |
| Age | How much life insurance you can own* |
| < 40 | Annual income x 30 |
| 41 – 50 | Annual income x 25 |
| 51 – 60 | Annual income x 20 |
| 61 – 70 | Annual income x 15 |
| *Note: Not all life insurance companies use the exact same age ranges and multipliers. | |
Based on this general rule of thumb, our 18-year-old part-time working college student would need to make at least $30,000 annually at Starbucks to be considered for a one million dollar life insurance policy.
Keep in mind that a rule of thumb is just a guideline rather than a hard and fast rule. Life insurance companies can choose to refuse approving the 18-year-old’s one million dollar life insurance policy if they don’t see justification for it.
On the flip side, life insurance companies can also approve higher coverage amounts than you’re initially qualified for on paper. For example, startup business owners who don’t take a salary the first year can still be approved for large amounts of life insurance even though their annual income doesn’t match up to the rule of thumb.
Okay, so let’s get to what you’re really here for.
How much does it cost to buy one million dollars’ worth of term life insurance?
Like any other amount of term life insurance, your individual factors such as your gender, age, tobacco use, and health are going to determine how much your premiums are. Your term length will also affect how high your premiums are. The more years you’re insured, the higher your premiums will be.
This table shows how much a 30-year-old man would potentially pay for a 20-year, $1,000,000 term life insurance policy based on his risk class.
| Male, Age 30, $1 Million, 20-Year Term | |
| Risk Class | Monthly Premium |
| Preferred Plus | $32.83 |
| Preferred | $43.95 |
| Standard Plus | $55.06 |
| Standard | $67.03 |
| Preferred Tobacco | $136.29 |
| Standard Tobacco | $176.47 |
If he was in great health, he would only pay $32.83 per month to be insured for $1,000,000 over the next 20 years. If he had health issues or perhaps legal challenges, such as DWIs, he may be put into a higher risk class and, therefore, pay higher premiums. If he uses tobacco, he’d be placed in one of the two tobacco risk classes.
The previous table showed how risk class can affect pricing, this table shows how your term length affects pricing.
| Healthy Male, Age 30, $1 Million | |
| Term Length | Monthly Premium |
| 10 Years | $20.86 |
| 15 Years | $25.14 |
| 20 Years | $32.83 |
| 25 Years | $46.51 |
| 30 Years | $57.63 |
| 35 Years | $70.45 |
For a man in great health, his monthly premiums vary on a one million dollar policy depending on how long he wants coverage for.
How much you pay for life insurance is really all determined by your mortality risk. The closer you are to death, the higher your premiums will be. So your age is, overall, the most important factor in determining your premiums. This table shows how much the cost of a one million dollar policy can be based on your age.
| Healthy Male, Age 30, $1 Million | |
| Age at Purchase | Monthly Premium |
| 25 | $31.12 |
| 30 | $32.83 |
| 35 | $35.40 |
| 40 | $53.35 |
| 45 | $90.12 |
| 50 | $141.42 |
| 55 | $236.32 |
| 60 | $415.02 |
| 65 | $751.03 |
| 70 | $1,537.63 |
Many people think life insurance is for “old people” but, in fact, life insurance is simply for anyone who has loved ones relying on them.
You can be a 25-year-old newlywed with your first baby on the way, as young as you are, your spouse and growing family still rely on your income. Buy life insurance as soon as you feel the need arises so you can lock in low premiums.
Term life insurance is affordable and can fit into most budgets. Our 25-year-old newlywed can purchase a million dollars in coverage to last him until he’s 60 years old for under $63 a month. If he unexpectedly died anytime before age 60, his spouse and their children would receive one million dollars. These proceeds can help put the children through college and pay off a mortgage.
For a young newlywed, if $63 per month is a little over the budget, lower your coverage amount. You may not need one million dollars of coverage. If you’re not sure how much life insurance coverage you need Quotacy has an easy-to-use needs calculator you can play with or you can always contact us directly and speak with an advisor.
If you have questions about life insurance make sure to leave us a comment. Otherwise, tune next week when we talk about how non-us citizens can get life insurance. Bye!
Photo credit to: Emma Freeman
About the writer
Natasha Cornelius
Marketing Content Manager
Natasha is a writer and content editor at Quotacy. She is also co-host of Quotacy’s YouTube series. She can’t get enough of life insurance and outside of work is also working toward her Chartered Life Underwriter designation. Connect with her on LinkedIn.
Great article! Good luck on getting your CLU designation! When you add up all of your current debts, your family’s regular living expenses, and future financial obligations, you might just find that you actually need a $1,000,000 life insurance policy. Once you realize the actual need for a million dollar life insurance policy, you may be pleasantly surprised by the affordability of the payments. We will post his to our social media accounts! Good luck in 2019!