How Much Does A Million Dollar Life Insurance Policy Cost?

Penny Gusner

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A $1 million life insurance policy may sound like overkill, but if you want your family well taken care of after you’re gone, you may find it’s not an astronomical amount after all.

The size of your family and your financial situation help determine how much life insurance you require. For example, if you earn $100,000 a year and want income replacement for 10 years, that alone gets you to a death benefit of $1 million.

Or, if you want only five years of income replacement and also want to leave money for your children’s college costs and to pay off some debts, you can easily hit the $1 million mark. Four years at a private school including room, board, and books costs around $200,000 (and in another 15 years may cost as much as $450,000 according to estimates).

Don’t assume you can’t afford a $1 million life insurance policy. People tend to overestimate the cost of life insurance, sometimes by triple the actual amount. See how much you can afford when looking at average rates and then get your own personalized life insurance quotes.

How Much Does a $1 Million Term Life Insurance Policy Cost?

We analyzed term life insurance quotes for $1 million policies to determine the average cost. The cost for a 10-year term $1 million policy is around $500, and around $650 for a 20-year term if you buy coverage in your 30s and are in good health and don’t smoke.

Remember, these are averages, and your cost will depend on your own age and health, plus other risk factors. However, our analysis of average rates will give you a general idea of what you can expect to pay.

Buying Younger Means Paying Less for a $1 Million Policy

Age is a primary rating factor for life insurance, and life insurance quotes will rise every year as you age. This is simply because as your life expectancy declines, the risk for the insurance company increases. That means you should buy coverage when you’re younger to lock in cheaper rates.

Our analysis reveals huge savings if you buy coverage in your 30s. Buying a 20-year term policy in your 50s or 60s means you’ll pay significantly more than if you buy coverage at a younger age:

• If you wait from age 30 to 40 to obtain a 20-year term $1 million life insurance policy, the rates jump up 50% for males and 65% for females.
• If you wait until 50, the rates increase 260% for both males and females compared to the cost for a 30-year-old.
• Waiting until age 60 has a cost increase of over 950% for males and over 600% for females, again compared to if you bought the plan back when you were 30. For males, at 60 the annual premium is over $5,000. If the policy was purchased at age 30, the rates would’ve been locked in at only $680 a year.

How Gender Affects the Cost of $1 million Term Life Insurance

As the estimated rate quotes show, gender is also a key factor when calculating life insurance rates. Females typically live longer than males, so they get a bit of a price break.

Our assessment shows that males continually pay higher rates, no matter the age. However, the difference between the rates varies as they age.

For example, looking at a 20-year-term policy, here is how gender affects rates:

• At age 30, males pay 38% more than females, which comes to around $130 more annually.
• At age 40, males pay 25% more, which comes to $144 more annually than females.
• At age 50, males pay 38% more than females and about $480 annually.
• At age 60, males pay 44% more than females, which comes to $1,536 annually.

$1 Million Term Life Insurance Rates by Term Length

If you want a life insurance policy that lasts longer, you’ll pay more. Finding the right length for you will depend on the concern you want to cover with life insurance.

You don’t want your policy to expire before the financial needs of your family are met. On the other hand, you may not need a longer-term if you buy the policy at an older age when some of your debts have been paid off or decreased substantially.

Our analysis found that:

• Upgrading from a 10-year term to a 15-year policy raises rates 12% for males and 23% for females.
• Moving from a 10-year to a 20-year policy costs males 50% more but only costs females about 30% more.
• For either gender, it’s a decent deal to double the time of your term life insurance policy and not even come close to doubling your premium.
• To triple the time of the policy to 30 years from 10, it raises rates 150% for males and 123% for females.

$1 Million Term Life Insurance Rates by Policy Amount

Our analysis looked at rates for $1 million policies compared to $500,000 to $2 million policies.

Is a $1 million term life policy right for you? You need to settle on what you want life insurance to cover (and for how long), but pricing out policies in different payout amounts will also help you determine which best fits your budget.

We found that:

• A $750,000 policy costs 32% more for males and 14% more for females than a $500,000 policy.
• Increasing a policy from $500,000 to $1 million costs 60% more for males and 38% more for females. That doubles your policy amount but doesn’t double your premium with either gender.

If you’re thinking of going even higher:

• A $2 million policy compared to a $500,000 one costs 192% more for males and 148% more for females.
• A $2 million policy compared to the cost of a $1 million policy is 83% more for males and 79% more for females.

Tips on How to Shop for $1 Million Term Life Insurance

The first step for shopping for any term life insurance policy is calculating how much coverage you need.
You want your life insurance payout amount to take into account your obligations, such as a mortgage, car loan, credit card balances, and any other debt you have accumulated. Also, consider additional money you want to leave to cover other financial matters, such as income replacement or paying for college.

Here’s a calculator to help you determine how much life insurance you need.

How much life insurance do you need?

Determine the term of the policy you need. How long do your family and loved ones need the money from the life insurance policy? For example, if you want to get your kids through college in 12 years, you’d want at least a 15-year policy.

Zero in on a term length but also look at longer policy terms for price comparison. It won’t hurt to expand your length if it fits your financial means so that if debts increase or aren’t paid off as fast as you anticipate, the life policy is there for a few more years.

For instance, if you don’t own a house now but plan to buy one with a 30-year mortgage in the upcoming years, it would make sense to expand your search from 15- to 30-year term lengths.

Once you have the policy amount and length of the policy determined, you’re ready to comparison shop for life insurance quotes.

When shopping for quotes for a $1 million term life policy, check if a medical exam is needed. Typically, life insurance companies want you to take a medical exam to understand your health and determine potential life expectancy.

However, recently no-exam life insurance has become more widely available. Note, however, that if you aren’t in very good or excellent health, you may not qualify for these instant policies. Also, not all no-exam companies offer $1 million policies.

It’s helpful to have on hand the following information as you shop for life insurance rate quotes:

• Height and weight
• Family medical history for immediate family, meaning parents and siblings
• Personal medical information, knowledge of past and current health
• Medications, both current and previous
• Lifestyle information, such as smoking and drinking
• Dangerous hobbies, such as piloting plans, and scuba diving
• Plans to travel outside the United States

Be sure to be truthful. Misrepresentations during the application process and void the policy in the future.