How Much Does a Million Dollar Life Insurance Policy Cost?

Does anyone else automatically think of Dr. Evil from the Austin Powers movies when you see the words “one million dollars”?  I hope I’m not the only one.  Being a “millionaire” is something most people only dream of becoming.  Most never realistically think they will ever have one million dollars, so why is buying one million dollars’ worth of term life insurance commonplace?

If you have a family and make a decent income, owning one million dollars of term life insurance is actually not that far-fetched.  Term insurance is quite affordable, even one million dollars’ worth!  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.

Using the needs analysis tool on Quotacy, you can see in the screenshot below that a $700,000 policy would be a good start to ensure that the mortgage is able to be paid off , to replace the lost income, and cover a funeral.  This number does not include college tuition costs for four children, which can range from an average total of $154,400 to $535,660, depending on the state and whether it’s public or private.  That $700,000 policy suddenly doesn’t seem like that much money.  Taking tuition into account, John and Jane would each be more suited to buying $854,400 to $1,235,660 in life insurance.

So, now that we know John and Jane could each use 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, so 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).

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	$55	$86	$102
Preferred	$69	$103	$124
Standard Plus	$95	$142	$169
Standard	$115	$172	$203

 

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	$52	$70	$83
Preferred	$59	$85	$96
Standard Plus	$77	$110	$126
Standard	$97	$140	$156

 

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	$93	$147	$161
Preferred	$114	$170	$195
Standard Plus	$162	$223	$270
Standard	$184	$283	$322

 

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	$77	$110	$133
Preferred	$92	$129	$144
Standard Plus	$122	$164	$190
Standard	$137	$201	$233

As you can see in the charts 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.  Since John and Jane have four children, I just kept their ages in the 40s.  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.

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	$60
	Preferred	$79
	Standard Plus	$103
	Standard	$127
Jane Smith	Preferred Plus	$48
	Preferred	$61
	Standard Plus	$84
	Standard	$97

A $1M life insurance policy is not necessary for everyone.  If you are not sure how much life insurance you need, play around with our needs analysis tool.  It will point you in the right direction.  From there you can run a term life insurance quote.  Our DIY quoting tool is super easy to use 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 as never been easier.

 

Photo credit to: Emma Freeman

 

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