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Do I need a $1 million life insurance policy?

A $1 million life insurance policy might seem a little high, but chances are you need more life insurance coverage than you think.

Nupur Gambhir

Nupur Gambhir

Published January 23, 2020


  • You should aim to purchase life insurance coverage that is 10-15 times your income; if you make around $100K annually, you will want to purchase $1 million in life insurance coverage

  • Income shouldn’t be the only factor when determining how much life insurance coverage you need — you also want to account for additional costs your beneficiaries may face

  • There are no restrictions on how your beneficiaries spend a $1 million life insurance death benefit; it can be used towards college tuition, medical care, or any other daily expenses they have

  • Each year you age, the cost of life insurance increases by around 8-10%. If you think you’ll need a $1 million dollar policy in the future, you’re better off locking in lower premium rates now

One of the most important parts of a life insurance policy is the death benefit — ensuring a financial safety net for your loved ones is usually the reason you’re purchasing life insurance in the first place. Putting sufficient coverage in place requires not only covering the current financial support you already offer, but also anticipating long-term costs.

While a $1 million policy might initially seem like too much life insurance, once you account for the long-term costs of dependent care and any outstanding debts, it may offer the amount of coverage you actually need. Read on to find out if a $1 million life insurance policy is right for you.



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What is life insurance coverage?

Life insurance coverage is equal to your policy’s death benefit, or the untaxed lump sum that your beneficiaries will receive from the insurance carrier when you die. It can range from $20,000 to millions of dollars, depending on your income, financial obligations, and how much insurance coverage is approved by the life insurance carrier.

What does a $1 million policy cover?

What can a $1 million policy cover? When the death benefit is paid out to your beneficiaries, there are no restrictions on what it can be used towards, meaning your beneficiaries can use it in any way that suits their financial needs.

Here are some common ways that the death benefit is used:

  • College tuition
  • Monthly bills and everyday expenses
  • Outstanding debts
  • Childcare or dependent care
  • Medical expenses
  • Funeral expenses

The death benefit can be paid out one of two ways: as a lump sum or in an annuity.

Receiving the death benefit as a lump sum means that the entire death benefit will be paid out at one time once the death claim is filed, whereas receiving it in an annuity means that the death benefit will be paid out in yearly installments.

Who needs a $1 million life insurance policy?

When you’re buying life insurance, you’re purchasing financial protection for your family in the event that you die prematurely. You want to make sure you’re purchasing enough coverage so that your dependents can cover their cost of living and any other expenses.

Most financial advisors recommend purchasing coverage that is 10-15 times your income, though this may change with age — someone who is younger may want to purchase more coverage if they think their future insurance needs will increase, while someone closer to retirement may need to purchase less coverage because they have fewer financial obligations.

While income can be a good basis for how much coverage you’ll want — at minimum, an individual making around $100k will want to purchase a $1 million policy — you’ll also need to take into account your specific financial needs. The best way to determine if you need a $1 million policy is to calculate your current expenses and future obligations, such as a child’s tuition or any outstanding debts.

Check out the Policygenius life insurance calculator to calculate exactly how much coverage you need.

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How much does a million-dollar life insurance policy cost?

As with all life insurance policies, the final cost of a $1 million life insurance policy will depend on your age and what health classification you receive during the underwriting process.

Check out the tables below for sample monthly premium rates based on Preferred health ratings for a 20-year term life insurance policy for a non-smoker:

Average life insurance rates by age for women


Average life insurance rates by age for men


Methodology: Quotes based on policies offered by Policygenius in 2020.

When you go through the underwriting process, you will also be evaluated for a few additional factors alongside your age to receive a life insurance premium rate. The following will affect what health classification you receive and how much you pay for life insurance:

  • Physical makeup — Your age, gender, and body mass index, which is determined by your gender and height-to-weight ratio
  • Medical history — Previous surgeries, hospitalizations, or illnesses are reviewed by an underwriter to understand the scope of your health. If you’ve recovered or are treating the condition, you could get a more competitive rate
  • Family history — Your family’s medical history can indicate the likelihood of developing certain illnesses
  • Lifestyle — Do you skydive for fun? Does your job put you at risk? This affects your life insurance classification
  • Prescriptions — The underwriter evaluates medications you took in the past to paint a complete picture of your medical history
  • Tobacco use — Smokers pay exponentially higher rates on life insurance; if you have a smoking habit you can expect to receive a lower health classification regardless of age and health.

Can anyone get a $1 million policy?

Depending on the insurance carrier and your age, there can be limitations on how much life insurance you are able to purchase. When you apply for a life insurance policy, life insurance carriers evaluate whether you are purchasing a reasonable amount of coverage based on your individual circumstances.

This is usually based on your income, net worth, general financial stability, and what life insurance coverage you already have. It’s possible that if you apply for a $1 million policy, the life insurance carrier comes back with a lower offer because the large amount doesn’t seem reasonable for your income or because you already have other policies in place.

Coverage based on age and income

Each carrier varies in the maximum amount of coverage individuals in each age group can purchase. Certain age groups (usually younger individuals) can apply for life insurance coverage up to 25 times their income, whereas others (usually older individuals) can only apply for up to five times their income.

Age can also play a role in how much coverage carriers offer. For example, if a student graduating in two years applies for a $1 million policy, they may only receive an offer of $250K for now because they have no income, but have the option to apply for more coverage in the future.

Likewise, a retiree in their 60s who has a high net worth and earns $30K in yearly dividends may only qualify for $300K in coverage, but receive an offer of $500K due to the need to cover their high net worth.

Coverage based on existing coverage

When the carrier decides how much life insurance coverage they are going to offer you, they will take into account any other life insurance policies you already have. If your pre-existing coverage and requested coverage combined exceed the amount of coverage you’re eligible for, you may receive a policy offer that is lower than the amount you applied for. For example, if you apply for a $1 million policy, but you already have a $500,000 life insurance policy in place, the carrier may come back with an offer of only $500,000.

Another stipulation to be aware of is that some carriers may only offer non-working spouses coverage that matches that of their working spouse.

How life insurance carriers approach coverage maximums varies for each carrier and shopping around for different policies is the best way to ensure you are able to purchase adequate coverage.

About the author

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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