When you think of $1 million, you’re probably picturing a suitcase full of money or perhaps a life of reasonable luxury. Even with that lump sum in mind, however, you might be surprised to think that $1 million is actually a reasonable amount when thinking about a life insurance policy.
A $1 million dollar life insurance policy is exactly what it sounds like: a death benefit of $1 million, paid out to your beneficiaries in the event of your death.
Whether you already have life insurance or you’re thinking about buying your first life insurance policy, one of the major factors to consider—along with term length, premiums, and overall dollar amount—is what that money will be used for. While your dreams for a $1 million windfall may look like a sudden influx of money, to your loved ones it may look like money for the mortgage, education expenses, and food on the table.
So when does a $1 million life insurance policy make sense? Who should consider applying for such a policy? What does $1 million dollar life insurance cost? Let’s look at when, how, and why someone would want to apply for and buy $1 million in life insurance coverage.
People Who Need a $1 Million Life Insurance Policy
Buying a $1 million life insurance policy does require some justification to the insurance company, but it’s easier than it sounds. Most life insurance companies recommend purchasing 10-12 times your annual income in life insurance coverage at minimum. If your salary exceeds $100,000 per year, a $1 million dollar policy makes sense.
Beyond your salary, however, you’ll want to factor in other expenses. A larger policy may be required if you have substantial debt or other financial obligations, such as a large mortgage or plan to have a child prior to your policy expiration. The estimated cost of raising a child—not including college tuition—is estimated to be $284,570. Other considerations include:
- Day-to-day expenses
- Final expenses
- Student loan debt
- Credit card debt
- Future college or education expenses
- Mortgage or rent payments
- Lost income
Between the cost of raising children, funding their future education, and providing for your family after you’re gone, a million dollar life insurance policy may be more of a necessity than you would expect.
How much does a million dollar life insurance policy cost?
Your life insurance premium depends on several different factors, but as a general rule it is better to buy it when you are younger and healthier. Because life insurance is generally less expensive the earlier you buy it, purchasing a 20 year or 30 year term life insurance policy for $1 million will likely lead to a lower monthly premium than if you waited five or even ten years to make this purchase. Your health classification depends largely on your medical history, which is why it’s best to buy life insurance early on.
Term length will affect the cost of your policy, too. While a shorter term can allow you to buy a larger amount of coverage for less money, a longer term locks in the current rate for a longer period of time. If your term expires, buying the same amount of coverage as a new policy or renewing for another term will lead to higher rates.
Other personal factors that can impact the cost of your policy include your overall health and medical history, or anything else that impacts life expectancy. This can include dangerous hobbies or high-risk jobs. As part of the application process, you’ll be asked a series of questions to help the underwriter determine how risky it would be to cover you for not just $1 million, but any amount. Answer them truthfully. Your insurance company will likely ask you to undergo a medical exam as part of your application.
Is it possible to secure a $1 million life insurance policy with no medical exam?
It is possible to buy $1 million in life insurance without undergoing a medical exam, as companies have recently found that consumers are more likely to purchase a life insurance policy with fewer steps in the process. This kind of policy availability is usually limited to individuals who are under 65 years old and in generally excellent health. No exam life insurance typically costs more than traditionally underwritten life insurance policies, too.
Compare $1 million life insurance quotes with SelectQuote.
$1 million in life insurance isn’t just an attainable option for many people. Depending on your expenses, family needs and career, it can be an absolute necessity. If you’re considering life insurance and have questions about whether purchasing a million dollar policy is right for your family’s needs, we can help.
At SelectQuote, our licensed insurance agents can compare policies from several different companies to provide you with life insurance rates that meet your budget while also offering the coverage you need.