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Million dollar life insurance

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A million dollars might seem like a lot of money, but if you were to die, would your family need that much to maintain their lifestyle? Possibly. Financial analysts suggest that you purchase a life insurance policy that is roughly 10-15 times your annual salary, so if you make $100,000 annually, a million dollar policy would be appropriate.

Even if you make considerably less, however, if you have debts such as a high mortgage or college tuition for several children, having coverage for one million dollars is not as far-fetched as it might seem.

What is million dollar life insurance?

Although there are different types of life insurance, all have one thing in common: they pay out a death benefit to the person or persons you name as beneficiaries if you die while the policy is active. In return, you make regular payments, called premiums, which help fund that eventual payout. If you don’t die during the life of the policy, you don’t get a payout. It’s that simple.

Million dollar insurance just means that the payout your beneficiary will receive is one million dollars. It’s possible to purchase policies with payouts that are as low as $10,000 or as high as $3 million. The higher the payout, the more your premium payments will be. Other factors that impact premiums include your age, health and the length of the policy.

Can anyone get a million dollar life insurance policy?

Not everyone is eligible for a million dollar policy. When you apply, your potential insurer will look at factors such as your age and annual income, as well as whether you already have other life insurance policies, and determine if you qualify for that level of coverage.

The younger you are, the more likely you’ll be approved for a high level of insurance. If you are a high-net-worth individual, the same is true. But if you’re making minimum wage or are unemployed, it’s unlikely that you would be approved for that much life insurance. 

Who needs million dollar life insurance?

If you’re making $35,000 a year, have no children and your spouse also works, a million dollars of life insurance is probably overkill, unless you anticipate the need for a large sum of money in the future and want to ensure your beneficiary will be able to handle it if you’re not there.

A million dollars of coverage can be very useful, however, if you’ve got multiple debts either now or anticipated in the future. This could include:

  • Paying off your mortgage.
  • Educating your children.
  • Health care costs.
  • Paying for end-of-life costs, such as a funeral.
  • Making sure no one is saddled with your consumer debts after you die.
  • Ensuring that a non-working partner is able to continue with the life they are used to.

If any of these are true — or, even more, if you have multiple reasons for needing money — a million dollars can ensure that your heirs are not left in a difficult situation if you were to die.

How much does million dollar life insurance cost?

There are multiple factors that go into determining the cost of your million dollar life insurance policy. The key fact to remember with life insurance is that it revolves around risk. Your insurer doesn’t want to have to pay out a death benefit, and so they will give preferential rates to those who pose a low risk of dying during the life of the policy.

The following factors all play a role in determining your premium rates:

  • Age: Life insurance is cheaper for younger persons than for older. A young healthy person may be able to purchase a million dollar policy for less than $50 a month, because they have little risk of passing away until they are much older. A 55 year old, on the other hand, will pay more because of the greater health risks that go with being older.
  • Gender: Because men statistically don’t live as long as women, insurance coverage for men is usually more expensive than it is for women.
  • Health: For most types of life insurance, you’re required to undergo a medical exam when you apply. If the exam discovers underlying health issues, or if you have a chronic condition such as diabetes or heart disease, your rates will increase.
  • Length of the policy: Shorter policies will be cheaper than longer-term policies. A ten-year term policy will cost you less than one that goes for 30 years. And a permanent policy, which stays with you until you die, will cost even more.
  • Type of policy: A simple term policy is preferable for most people looking for coverage. Term insurance is far cheaper than the other primary type of insurance, permanent insurance, of which the most common type is whole life

What is the monthly premium for a million dollar life insurance policy? The rates below are samples based on a 20-year term policy with a payout of one million dollars, for a non-smoker in good health living in New York.

AgeGenderMonthly premium

How to get million dollar life insurance

Purchasing a million dollar life insurance policy isn’t hard, but there are several steps you’ll need to take during the process.

  • A good first step is consulting with your financial advisor or a knowledgeable insurance agent who can help you determine if you truly need a million dollars in coverage. They can also help you determine the term length and type of policy that would be best for your own circumstances.
  • Once you’ve nailed down the details of what you want, call several possible insurers to get rate quotes. Not sure who to call? Check out J.D. Powers annual life insurance study to see who the top insurers are, as determined by customer satisfaction ratings.
  • Once you have chosen a company, you’ll be asked to fill out a detailed application that will include questions about your own health and that of your family. Be honest and as detailed as you can. If you are found to lie on your application, your insurer can refuse to pay out on a claim.
  • You will probably have to have a medical exam, which can happen at home or your place of work. 
  • It will take roughly four to six weeks for the underwriting of your policy. You’ll be informed following this if your application has been approved or denied.
  • If approved, you’ll write a check for your first premium payment, and your policy will go into effect.

The takeaway

  • A million dollar life insurance policy can help beneficiaries following the death of the breadwinner.
  • A good rule of thumb is to have insurance equal to 10-15 times your annual income.
  • An inexpensive term insurance policy can offer million-dollar coverage for a low cost.

Having a million-dollar payout from a life insurance policy may seem like a lot of money, but it can be just enough for families with dependents and large debts. It’s possible to get inexpensive term policies paying out one million dollars for less than $50 a month if you are on the younger side.

Mary Van Keuren

After 30 years as a writer and editor in academia, Mary now writes full-time for the insurance and finance industries. Her work has appeared on Reviews.com, TheSimpleDollar.com and Bankrate.com, as well as other consumer-focused websites.

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