How Much Does a Million-Dollar Life Insurance Policy Cost?
Life insurance quotes for a million-dollar policy vary across several factors. We recommend that you purchase life insurance as soon as you realize you have a need because life insurance quotes will increase with age. As health issues creep in, these can also raise life insurance quotes.
Once you buy a term life insurance policy, your life insurance rate is fixed. This means your premiums will never increase during that term. So, if you buy a 30-year $1,000,000 life insurance policy for $52 per month, your rate will never change during that 30-year term as you age, even if you develop a health issue.
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Can anyone get a million-dollar life insurance policy?
In order to qualify, insurance companies require financial justification for large policies because life insurance is designed to replace wealth, not increase it.
There are also many factors that go into determining if you’re eligible for a million dollars of coverage. These include age, income, health, and lifestyle.
Not everyone can justify owning a million dollars of life insurance. However, purchasing a million-dollar policy doesn’t seem far-fetched when you add up all the financial obligations you would leave behind.
This can include the cost to replace your income, pay off the mortgage, send children to college, and take care of any other outstanding debt.
When does a million dollars of coverage make sense?
Not everyone needs a million-dollar life insurance policy, but it can make sense in many family situations.
Consider the things you’ll pay for during your lifetime. Your student loans, car loans, mortgage or rent payments, and essentials like clothing, food, gas, and utilities. If you have children, add their essentials plus daycare, school activities, and their college education.
Bills add up quickly. If you died unexpectedly, a $1,000,000 life insurance policy makes sense. Your surviving spouse or partner will still need to pay those expenses.
Let’s look at a common family scenario when one million dollars’ worth of life insurance is needed.
Example: Married couple with four kids and a house
John and Jane Smith, both 40 years old, each make approximately $60,000 annually. They have four children (ages 8, 6, 4, and 2) and live in a five-bedroom home with a $400,000 mortgage.
If either of them die, their wish is to minimize the disruption by having enough coverage to take care of the mortgage, so the surviving spouse and children don’t have to move.
Another wish is to take care of college tuition for all four children. Depending on the state and whether it’s public or private, the average total cost can range from $154,400 to $535,660.
Using the life insurance needs calculator, here are some of the factors and costs that go into determining how much life insurance coverage John and Jane need.
They want their life insurance policy to:
Cover a funeral: $10,000
Pay off mortgage: $400,000
Replace lost income: $600,000
Pay for children’s college tuition: $155,000
Based on these numbers, the suggested coverage amount for each would be $1,200,000.
For this example, we didn’t include additional debt, current savings and investments, or if they have a life insurance policy they plan to keep. These factors could significantly impact the dollar amount needed.
