Who needs a $1 million life insurance policy?

If you have dependents or large debts, like a mortgage, a million-dollar life insurance policy may be right for you.

Headshot of Policygenius editor Nupur GambhirAmanda Shih author photo


Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

&Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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The most important part of a life insurance policy is the death benefit—this financial safety net for your loved ones is the main benefit of purchasing a policy. Securing sufficient coverage requires not only accounting for the financial support you currently provide but also anticipating future expenses.

While a million-dollar life insurance policy might initially seem like too much life insurance, once you account for the long-term costs of dependent care and any outstanding debts, you may discover you need close to that amount, if not more. Read on to find out if a $1 million life insurance policy is right for you and the average cost at every age.

Key Takeaways

  • Purchase life insurance coverage at least 10 to 15 times your income; if you make $100,000 annually, that’s $1 million.

  • Account for any additional costs, like shared debts, when calculating your coverage needs.

  • There are no restrictions on how your beneficiaries spend a $1 million life insurance death benefit.

Do you need a million-dollar life insurance policy?

The best way to determine whether you need a million-dollar policy is to calculate your current expenses and future financial obligations. For example, say you:

  • Make $100,000 per year

  • Have $200,000 remaining on your mortgage and

  • Plan to have a child before your policy expires

Your remaining home loan plus the cost of raising a child (approximately $284,570) [1] would total almost $500,000. To cover your mortgage, childcare expenses, and provide an income replacement equal to even five years of your $100,000 salary, you’d need $1 million in coverage.

Policygenius advisors recommend purchasing coverage that is 10 to 15 times your income. If you’re younger, you may want more coverage for future financial obligations, while if you’re closer to retirement, you’ll likely need less.

→ Learn how to calculate how much life insurance you need

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

The cost of a $1 million policy will depend on your age and what health classification you receive during the underwriting process, as well as how long your coverage lasts. 

Your classification depends on your medical history and lifestyle factors, like smoking habits or violations on your driving record, but buying when you’re younger and healthier is generally a savings advantage. For example, a 25-year-old female might pay $34.41 per month for a 20-year, million-dollar policy, while a 45-year-old female in similar health would pay $86.54.

Average monthly premiums, $1 million life insurance policy

The table below reflects sample premiums for a million-dollar, 20-year term policy for males and females.

AgeSexMonthly Premium

Methodology: Sample premiums are for male and female non-smokers in a Preferred health class, buying a $1,000,000, 20-year term life insurance policy; Life insurance averages are based on a composite of policies offered by Policygenius from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI, and Transamerica and may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 10/08/2021.

→ See more term life insurance rates

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What does a million-dollar life insurance policy cover?

When the insurer pays the death benefit to your beneficiaries, there are no restrictions on how it’s spent.

Here are some common ways beneficiaries spend the death benefit:

  • Childcare or dependent care

  • College tuition

  • Funeral expenses

  • Investing

  • Medical expenses

  • Monthly bills and everyday expenses

  • Outstanding debts

The death benefit is generally paid out as a lump sum, which means you get the entire death benefit after filing the death claim, tax-free.

Who can buy a million-dollar life insurance policy?

Depending on the life insurance company and your age, you may not be eligible for a million-dollar policy. When you apply for life insurance, insurers 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. For example, if you’re a graduate student with limited income applying for a $1 million policy, you may only receive an offer of $250,000 with an option to apply for more coverage in the future.

Coverage based on age and income

Each provider sets a maximum amount of coverage individuals in each age group can purchase. Here are common ranges based on Policygenius’ partner insurance companies:

  • Under age 40: 25 to 40 times yearly income

  • Age 40 to 60: 10 to 25 times yearly income

  • Age 60 to 70: 5 to 10 times yearly income

Based on these ranges, you’d need to make at least $25,000 under age 40 to qualify for a million-dollar life insurance policy, but $100,000 to $200,000 to qualify at age 60. 

For non-working spouses, providers may only offer you coverage matching that of your working spouse.

Net worth can also impact your insurance offer. If you’re a retiree in your 60s with a high net worth who earns $30,000 in yearly dividends, you may only apply for $300,000 in coverage but receive a greater offer to account for your total assets.

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Coverage based on existing coverage

If you already have some life insurance coverage and apply for another policy, you may receive a policy offer that is lower than the amount for which you applied. For example, if you apply for a $1 million policy, but you already have a $500,000 life insurance policy, the insurance company may come back with an offer of only $500,000.

Each life insurance company approaches coverage maximums differently, so shopping around is the best way to ensure you get the right amount of coverage. 

One million dollars can sound like a lot of life insurance, but if you have dependents or debts it may be the minimum amount of coverage you need. If you think a million-dollar life insurance policy fits your financial needs, an independent agent or broker can help you find competitive pricing based on your profile.

Frequently asked questions

Do I need a million-dollar policy?

Our advisors recommend buying coverage at least 10 to 15 times your salary, and up to an amount that accounts for any debts or dependents you have. If you make $100,000 per year, your coverage needs total at least $1 million.

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

The cost of a policy varies based on your age, health, and other risk factors. For a 20-year policy, a healthy nonsmoker might pay approximately $40 per month throughout their 30s, $95 in their 40s, and $245 in their 50s.

Is a million-dollar life insurance policy enough coverage for me?

Tally up your income, expenses, debts, and any future expenses you anticipate, like a mortgage. A $1 million policy would be too much for a recent college graduate, but a family of five with a mortgage might need even more than $1 million in coverage.