A million dollar life insurance policy may cover funeral costs and other death-related expenses and can provide long-term financial stability for your loved ones. A high-dollar death benefit can help cover a variety of costs, including:
• Funeral expenses
• Day-to-day bills and monthly expenses
• Mortgage or rent payments
• College tuition or other education expenses
• Medical expenses
• Outstanding debts
• Business partnerships and obligations
• Childcare and dependent care
The entire death benefit for a million dollar life insurance policy can be paid out as a lump sum or in yearly installments to your beneficiaries. There are no restrictions on how your loved ones spend the proceeds. They are allowed to use the funds in any way that meets their financial needs.
The general rule is to purchase a life insurance policy that's equal to seven to 10 times your current salary. If you earn $100,000 or more a year, and have a mortgage, spouse and children, you might need a $1 million life insurance policy. The right amount of life insurance depends on a variety of factors:
• Earnings. If you’re a recent college graduate or just starting out, you probably don’t need a million dollar life insurance policy. However, if you are a high-earning professional with a mortgage and dependents who rely on your income, you might need even more than $1 million in coverage.
• Age. Your age will play a part in your eligibility and premiums. The older you are, the more expensive life insurance is.
• Qualifications. While this will largely depend on your income, other factors, such as your net worth, healthcare records and lifestyle habits, will be used in underwriting to determine how big of a policy you can buy.
When purchasing a life insurance policy based on income, keep in mind this typically fluctuates throughout your working years. For example, what you earn in your 20s may double by the time you reach your 40s, or you may experience periods of unemployment at certain times in your professional life. As you approach retirement age, you might need less coverage because you have fewer financial responsibilities.
How Much Does a Million Dollar Life Insurance Policy Cost?
The cost of a $1 million life insurance policy varies depending on your age, health and lifestyle.
For example, for a 20-year policy, a healthy applicant might pay $30 to $50 per month in their 20s and 30s compared to $80 to $200 a month for someone in their 40s or 50s.
If you’re a 20-something graduate, just began your career and you apply for a million dollar life insurance policy, you may only receive a fraction of that amount (such as $250,000) because you have little to no income. Once your salary increases, you can apply again for a larger policy.
Each life insurance company is different, so shopping around is the best way to find the right coverage that fits your needs.