Fun fact (depending on your definition of fun): The average American worker earns between $1 million and $3 million over their lifetime, depending on education and career, according to a recent US Census survey.
So while a million dollars may seem like a lot of money, it’s actually the right amount of life insurance coverage for many families. That’s because you generally want to buy a life insurance policy with enough coverage to cover about 5 to 10 times your annual salary. This is so that the death benefit can help your loved ones pay for a number of things, from final expenses to day-to-day costs such as mortgage payments, tuition, even groceries.
To find out if $1million policy might be right for you—and how much $1 million life insurance would cost if it is—we broke down all the details of life insurance to help you make the most informed decision for the future of your loved ones.
What is $1 million life insurance?
Life insurance works like this: You pay a regular premium, usually every month, and in the event of your death, the insurer will pay your designated beneficiaries the amount you purchased. How much you pay, how much insurance you get and how long you are covered all depend on the type of life insurance you buy.
Broadly speaking, there are two main types of life insurance: permanent life insurance and term life insurance.
As you can probably tell, permanent life insurance generally lasts until you die. However, life insurance is valid for a certain period of time (the “period”). Which one is right for you? Continue reading.
Term life insurance
Life insurance covers you for a certain period, which you choose when you buy the policy. Typically, you can get insurance for 10, 15, 20, 25 or even 30 years. This can be a good way to ensure that your family is covered by your expected retirement, for example, after which your savings or pension may be enough to cover your expenses, and after your dependents (read: children) are no longer, well, dependent.
Many people also choose to get coverage that lasts until they expect to pay off a large expense, such as their mortgage or their children’s tuition.
Because it lasts for a certain amount of time, and many people are relatively healthy during those years, life insurance is often cheaper than permanent insurance.
Haven Life offers two types of term life insurance:
Haven Term: Fully subscribed life insurance
Medically guaranteed life insurance usually requires a medical examination. (But not always, thanks to technological advances.) It usually offers the lowest premiums, because the insurer can base its evaluation on a complete picture of your health.
You can get up to $3 million in life insurance coverage from Haven Term.
Haven Simple: Life Insurance Without a Medical Degree
Simplified life insurance inquiry requires little more than filling out the application and does not require a medical examination for approval. This makes it quick and easy to get coverage, but it can cost more because the insurer is taking a risk without a comprehensive look at your health. You must also be truthful in your application, otherwise you risk non-issuance of the policy (or non-payment of the death benefit).
You can get up to $1 million in coverage from Haven Simple.
Permanent life insurance
Permanent life insurance covers your entire life, from the day the policy starts until the day you die. This means that it is often more expensive than life insurance, in exchange for lifetime coverage.
There are several types of permanent life insurance, with whole life insurance being among the most common. An advantage of whole life insurance is that you can usually borrow money against the value of the policy, although this may reduce the payout and may have unexpected tax consequences.
Universal life insurance is the most flexible. It allows you to change or update your policy throughout your life, to accommodate changes in financial status or needs, or to re-evaluate your coverage based on your health or medical issues. This allows you to lower your coverage and premium later in life when you may have fewer financial obligations to take care of if you die.
What does a $1 million life insurance policy cover?
The payout from a life insurance policy is often issued as a lump sum and can be used on anything the beneficiary chooses. This includes immediate expenses, such as final expenses (including funeral and burial), smaller expenses such as groceries and even gas for your car, and larger long-term expenses such as mortgage, tuition or outstanding debt.
Think of it another way: A $1 million life insurance policy is designed to cover all the expenses your loved ones incur after you die, but may not be able to afford without your income.
Who needs a $1 million policy?
A million dollar policy is just right for many families – slightly more than the average payout at Haven Life. That may seem like a lot, but the costs of grieving, as well as any remaining expenses, can add up.
When you’re no longer around to provide income for your family, the policy can help fill those gaps, allow your partner or children to pay off your home, cover medical expenses associated with your passing, and keep the cash flowing from month to month now that your income is out of the equation.
To determine if a million dollar policy is the right amount for you, consider factors such as your average monthly expenses, family size and current income. And again, there’s that oft-quoted rule of thumb: Consider getting coverage worth 5 to 10 times your annual salary. If you earn between $100,000 and $200,000 per year, a $1 million term life insurance policy may make sense for you.
How much does a $1 million insurance cost?
Life insurance rates are determined by your age and general level of health. Other factors that may affect your life insurance premium, including age, life expectancy, current health or risk factors, term, occupation and lifestyle or habits.
To determine your insurance cost, you fill out a questionnaire covering all these factors, which an actuary then analyzes to determine the most cost-effective monthly premium for your policy. Depending on the policy, your assessment may include a basic medical examination sponsored by the insurer, which may result in lower rates.
You might be surprised to know that a million dollar policy can cost less than your monthly streaming service budget if you’re young and healthy.
The sooner you get coverage, the better, as premiums on new policies tend to rise the older you get, especially if new health problems arise. Plus, it’s ideal to get coverage today in case something happens to you tomorrow.
See the charts below for more information on how much a million dollar life insurance policy can cost depending on your age and term.
Average premium cost for a $1,000,000 Haven Term life insurance policy
|Age||Sex||10-year period||20-year period||30-year period|
|35||Woman||$18.32||$29.03 USD||51.5 USD|
Estimate based on pricing for qualified Haven Term applicants in excellent health. Price differences will vary depending on age, health status, coverage amount and term length. These rates do not reflect rates for applicants in DE, FL, ND, NY and SD. Coverage is available up to $3 million.
Average premium cost for $1,000,000 non-degree term life insurance for Haven Simple
|Age||Sex||10-year period||15-year period||20-year period|
Estimate based on pricing for qualified Haven Simple applicants in excellent health. Price differences will vary depending on age, health status, coverage amount and term length. Haven Simple is currently not available in DE, ND, NY and SD.
Protect your loved ones with Haven Life
At Haven Life, we believe life insurance should be less difficult. That’s why we’ve created a simple online platform where you can get a life insurance quote, apply for coverage and potentially even get coverage over your lunch break.
No one likes to think about the inevitable, but it’s best to take care of these things before it’s too late. Get started today, and your loved ones will be thankful you did.