How much does a million dollar life insurance policy cost?

One million dollars may seem like a lot of life insurance coverage. But it's actually a fairly typical number. Think about all your debts, living expenses, and what you want your family to have in the future. If something happens to you, they'll need to replace several years of income you would have otherwise provided.

You may actually need more than $1 million in coverage.

The good news? A policy probably costs less than you think – see for yourself:

This calculator will estimate your life insurance needs and tell you the cost for a 20-year term life insurance policy – one of the most common types of coverage available.

What does one million dollar life insurance mean?

When people talk about the one million dollar policy, they usually refer to the "face value" or size of the death benefit. That's the amount of money paid out to your family if you unexpectedly pass away while the policy is in force. The benefit is paid out income tax-free and typically as a lump sum – although a beneficiary can choose instead to receive the money in installments over time.

When does million dollar coverage make sense?

Why do people typically buy life insurance? Because if something happens and they pass away, it will help provide the financial support their loved ones need. So, it may make sense to get coverage of a million dollars (or more) if that’s the life insurance payout needed to meet future expenses and help ensure they can afford the life you want them to have.There are several ways to estimate what that means in actual dollars. Our life insurance calculator uses the “Human Life Value” method, which looks at your current annual income plus what you expect to earn in the future. Between the ages of 18 and 40, it multiplies current income by about 30; as you get older and have fewer working years left, that multiple decreases.¹ Other rules of thumb include:

Consider multiplying your income by 10

Take your annual salary, and add a “0” at the end. So $50,000 salary equals $500,000 of coverage, $75,000 equals $750,000, and so on.

Consider multiplying your income by 10 – and add college tuition for each child

How much should you add? Account for somewhere between $100,000 and $150,000 per child. If you split the difference – and have two kids – that’s an extra $250,000.

Consider using the DIME formula

DIME stands for Debt, Income, Mortgage, and Education. This method estimates your coverage needs as the sum of your financial obligations and other expenses:

• Debt: Total all your outstanding debt, including credit card balances, personal loans, and other financial obligations.

• Income: Take your salary and multiply by the number of years you think your family needs protection – or at least as long as you have children at home.

• Mortgage: Look at your last statement and get the payoff amount.

• Education: The anticipated cost for sending each of your children to college.

How much does a million dollar policy cost?

The actual price you’ll pay for a million dollar policy depends on several factors that determine your risk to insure, such as age and health, as well as the specific features of your policy. To better understand how some of those factors affect cost, we'll look at the monthly premium amount for a $1 million policy by gender, age, and term length.

Monthly cost for a $1,000,000 policy by gender (age 30)

Monthly premium cost $1,000,000 of 20-year term life coverage, for healthy non-smoker applicants, age 30²

Women pay less for life insurance than men of comparable age and health. This has nothing to do with chivalry; women enjoy lower average rates because they have a statistically proven tendency to live longer than men – so they pose less risk to the insurance company. Other factors include any lifestyle (smoking) and occupation risks (safety), health history of immediate family members , and any additional coverage options you might choose.

Monthly cost for a $1,000,000 policy by age (20-year term life policy)

Monthly premium cost $1,000,000 of 20-year term life coverage, for healthy non-smoker applicants.³

Why does life insurance get more expensive with age? Because as you get older, life expectancy decreases – and the likelihood of an insurance payout increases. So understandably, age is an important factor that affects rates. It also means there may never be a better time to get life insurance than now: the longer you wait, the more you'll typically pay.

Monthly cost for a $1,000,000 policy by term length (Healthy non-smoker, age 30)

Monthly premium cost $1,000,000 term coverage, for healthy non-smoker applicants age 30.⁴

The longer your coverage term, the more you pay for coverage. Why? Because while a person may have a very small chance of passing away over the next year, there's a much higher chance of death over the next 30 years. Nevertheless, if you think you'll need protection for 30 years, you should probably apply for a 30-year policy, as opposed to, say, a 20-year policy now and another 10-year policy after it expires. You'll pay significantly higher rates for the policy you purchase in 20 years, and if you develop a health issue, you may not even qualify for coverage. Another alternative? Instead of getting a 30-year term policy, get a permanent whole life policy that covers you for the rest of your life – with monthly premiums that never go up.

The type of policy affects the cost of coverage

All life insurance policies pay a death benefit to your loved ones if you pass away. But they don't all work – or cost – the same. Here's what you should know about term vs. whole life insurance, two of the most common types of policies:

Term life insurance

Term life insurance rates are typically significantly less than permanent whole life, making a million-dollar policy very cos-effiecient, especially for younger buyers. However, term is "pure" life insurance coverage designed only to provide a death benefit if you die while your policy is in effect. The protection is temporary, typically for a set period of 10, 15, 20, or 30 years. No matter how long your term lasts, when it ends, there's no value to the policy despite years of paying premiums. Also, you're no longer protected – you either have to apply for a new policy and pay higher rates (because you're older) or go without coverage. However, many term life policies (such as those from Guardian) may let you convert to permanent coverage while the policy is still in effect.

Whole life insurance

This type of permanent insurance costs more than term because it is designed to provide life-long protection and other financial benefits. Like a term life policy, there is a guaranteed death benefit payable from the first day the policy is in effect.⁵ Unlike term life coverage, that protection never ends, as long as premiums are paid. You also get a financial asset that can last your entire life because whole life policies build cash value.⁶ A portion of your premium dollars can contribute to a policy’s cash value and that sum grows at a guaranteed rate – with tax advantages.⁷ A mutual insurance company (such as Guardian) may also pay dividends, which can further compound growth.⁸ Over time, the cash value can grow into a significant sum that can provide tax-effiecient personal loans, tax-deferred growth, provide cash to supplement retirement income or even be used to help pay monthly premiums.⁹

How to buy a million dollar policy

At work

If your workplace offers life insurance as a benefit, it could be a good place to start – even if you can't get the full amount of coverage you want. Employer-provided life insurance policies feature group rates, which may be a better value for you. As a result, it's generally affordable and easy to buy. Your employer has done the work of getting reputable quotes and choosing a policy, so enrolling typically requires little more than signing a form. For lower coverage amounts, you do not have to have a medical exam or provide medical records. If the maximum benefit amount isn't enough for your needs, you can supplement your coverage with another policy.

Online

If you don't have workplace coverage – or want to supplement it – it's easy to get term life insurance quotes online. Many providers, including Guardian, will estimate how much you need, make it easy to compare rates, and start your application – all within minutes. On the other hand, if you're looking for a whole life policy that builds cash value, it's harder to get a quote for permanent coverage online. These types of financial products are more complex and should be tailored to your individual financial needs, so it's worth your while to talk things over with a financial professional.

Working with a financial professional

If you're interested in permanent coverage with a wealth-building component – or you're not sure what kind of protection is best for you – it's a good idea to work with a professional who can help guide these important financial decisions. They can provide knowledgeable information about the options that fit your current budget and long-term financial goals. If you have a financial professional you trust, ask them how much coverage and what type of policies to consider. Otherwise, Guardian can connect with a financial professional who will listen to your needs, tell you about some of the best ways to meet those needs at a cost you can afford, then help you decide.