How Much Does a Million Dollar Life Insurance Policy Cost?

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.

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 $1,000,000 policy across a couple ages and the typical non-smoker risk classes (Preferred Plus being the best possible class offered.)

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 $1,000,000 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.

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.