It can be tricky to find the right amount of coverage when it comes to life insurance. For many people, a million-dollar life insurance policy is a good choice. This policy is enough to cover your funeral expenses, pay off your debts, and potentially support any family members that have been relying on you. However, these policies are not so expensive that you can’t fit them into your monthly budget. You might be wondering exactly how much a million-dollar life insurance policy costs – here’s what you need to know.
How Much Does a Million Dollar Life Insurance Policy Cost?
The idea of purchasing a million-dollar life insurance policy might sound daunting, but it’s actually more affordable than you might think. If you’re young and healthy, this life insurance policy could cost anywhere between $25 to $75 per month on average. Older customers may end up paying higher monthly premiums, depending on their health status. Of course, the cost of a million-dollar life insurance policy depends on which provider you go with and what kind of policy riders you are looking to add to your coverage. Your monthly premium costs will also depend on the length of your life insurance policy – for example, a 30-year policy is going to cost much more than a 20-year policy. Term life insurance policies only cover you for the length of the contract, and once the policy runs out, you’ll need to apply for a new one (often at higher rates). It’s often worthwhile to pay slightly more for a longer-term life insurance policy to ensure that yours doesn’t run out too early.
What Factors Affect the Cost of Life Insurance?
There are a number of factors that insurance companies look at when determining policy costs. Life insurance costs are different for everyone – they depend on your personal demographics. The insurance company will assess how likely you are to pass away and require a payout – the more likely you are to die, the higher your insurance costs will be. Here are some of the factors that affect the cost of your life insurance policy.
- Age: The older you are, statistically the more likely you are to pass away. Because of this, insurance companies charge higher premiums for older people. You can combat this by purchasing a long-term insurance policy at a relatively young age, when your premiums are lower.
- Health status: If you have a chronic condition or any sort of genetic conditions that could lead to health problems later in life, you will be charged higher premiums. Most insurance companies conduct thorough health exams to determine their health status.
- Health habits: Even if you are in good health now, you could be charged higher premiums if you are a smoker, participate in recreational drug use, or drink to excess. These are all considered risky behaviors that could shorten your life span.
- Occupation and hobbies: If you have a job or hobby that is physically dangerous, you could be charged extra on your life insurance premiums to compensate for the extra risk. For example, if you’re into skydiving, race car driving, or deep-sea scuba diving, for example, you will likely need to get a specialized insurance policy.
- Gender: Women statistically live longer than men, so they generally pay slightly less for their life insurance policies.
What to Consider When Determining How Much Life Insurance You Need
The right amount of life insurance coverage is different for everyone. Some people may need more than $1 million to support their families, while others can get by with far less. A general rule is to start with about 10 years’ worth of income replacement, and then make adjustments based on other financial factors in your life. Here are some important factors to consider when determining what type of policy you need.
- Funeral expenses. At the very least, your insurance policy will need to cover the necessary end of life expenses you prefer. The average cost of a funeral is around $20,000, although it can be more or less depending on where you live and the type of funeral you want.
- Debt payments. If you’re paying off student loan debt, a mortgage, or any other type of debt, you’ll need to factor that in when determining life insurance costs to ensure that your family doesn’t get stuck with the bill after you pass.
- Income replacement for your family. If you have a spouse and kids that rely on you for income, you’ll need to make sure they’re covered for the next several years. These expenses can add up quickly, so it’s always better to be safe than sorry and go for a slightly higher death benefit than you think you might need. In addition to replacing your income, you’ll want to consider the most likely scenario for your family after you pass. In many cases, families will relocate after a major death, so you’ll need to factor in the cost of a new home.
Because there are so many costs that your family might incur after you pass, it makes sense for most people to take out at least a $1 million dollar life insurance policy. And while it might sound daunting, these policies can actually be quite affordable, particularly if you purchase one while you are still young. To get the best pricing on your life insurance policy, be sure to shop around and get quotes from several different providers.