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Who needs a $1 million life insurance policy?

A million-dollar life insurance policy ensures your dependents have enough long-term financial protection. We break down whether you need one and how much it costs.

Nupur GambhirAmanda Shih author photo

Nupur Gambhir & Amanda Shih

Published October 1, 2020


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

  • Income shouldn’t be the only factor when determining how much life insurance you need — account for any additional costs your beneficiaries may face, like shared debts

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

  • Every year, the cost of life insurance increases by 4.5-9%, so if you think you’ll need a million-dollar policy in the future, you’re better off locking in lower premiums now

The most important part of a life insurance policy is the death benefit — this financial safety net for your loved ones is usually the reason you’re purchasing a policy in the first place. Securing sufficient coverage requires not only accounting for the financial support you currently provide 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, you'll discover you likely 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.

Do you need a million-dollar life insurance policy?

When you buy life insurance, you need to purchase enough coverage so that your dependents can cover their cost of living and any other expenses when you’re gone.

Policygenius advisers recommend purchasing coverage that is 10-15 times your income, though this may change with age — if you’re younger, you may want to purchase more coverage if you see your insurance needs increasing in the future, while if you’re closer to retirement, you need less coverage because you have fewer financial obligations.

While your income can be a good basis for how much coverage you’ll need, you should also account for 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 school tuition or any outstanding debts, and get enough to cover those costs and replace your income.


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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 policy will depend on your age and what health classification you receive during the underwriting process. Your classification depends on your medical history and other risk factors, like smoking habits or violations on your driving record, but buying when you’re younger and healthier is generally a savings advantage. Preferred and Preferred Plus classifications receive the most affordable premiums, while people with Standard and Substandard classifications pay more.

Average monthly premiums, $1 million life insurance policy

The table below reflects sample premiums for a million-dollar, 20-year term policy for men and women of different ages in the Preferred Nonsmoker health class.

Age Monthly Premium

Methodology: Average premiums based on sample policies from the 11 carriers that offer policies through Policygenius in 2020, including AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Principal, Protective, Prudential, SBLI, and Transamerica, for a Preferred health class.

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What does a million-dollar life insurance policy cover?

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

Can anyone get a million-dollar life insurance policy?

Depending on the insurer 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, 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. It’s possible that if you apply for a $1 million policy, the insurer will come 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 provider varies in the maximum amount of coverage individuals in each age group can purchase. People younger than 40 years old can usually apply for life insurance coverage up to 25-35 times their income, whereas people aged 66 years and older might only be approved for up to five times their income.

Income can also play a role in how much coverage you’re offered. For example, if you’re a student graduating in two years and applying for a $1 million policy, you may only receive an offer of $250,000 for now because you have no income, but with an option to apply for more coverage in the future.

On the other hand, 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 an offer of $500,000 to cover your net worth.

Coverage based on existing coverage

When the insurer decides how much life insurance coverage 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 for which you’re eligible, 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.

Another stipulation is that some insurers may only offer non-working spouses coverage that matches that of their working spouse.

Each life insurance company approaches coverage maximums differently, so shopping around is the best way to ensure you get the right amount of coverage. If you think a million-dollar life insurance policy is right for your financial needs, an independent agent or broker can help you find competitive pricing based on your profile.

Who needs a $1 million life insurance policy FAQ

Do I need a million-dollar policy?

Our advisers recommend buying coverage of at least 10-15 times your salary, and up to an amount that accounts for any debts or dependents you have. If you make approximately $100,000 per year or have children, a spouse, and a mortgage, your coverage needs could easily 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 $30-50 per month in their 20s or 30s, $80-110 in their 40s, and $200-245 in their 50s.

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

It depends on your financial situation and lifestyle. Tally your income, expenses, debts, and any future expenses you might have like college tuition for children or a mortgage. While a $1 million policy would be too much for a recent college graduate, a high-earning family of five with a mortgage and auto loans might need even more than $1 million in coverage.

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.

Insurance Expert

Amanda Shih

Insurance Expert

Amanda Shih is an insurance editor at Policygenius in New York City. Previously, she worked in nonfiction book publishing and freelance content marketing. Amanda has a B.A. in literature and communication from New York 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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