Last Updated: 4/23/2018
You don’t need to be a millionaire to need $1 million or more in life insurance. While a $1 million or $2 million term life insurance policy may seem like a lot of coverage initially… it’s not. When you take income replacement, debts, and funeral expenses into account, $1 million might just be the amount you need to give your family financial security when you pass away.
Don’t be like one of the many people who are under-insured because they believe $1,000,000-$2,000,000 is too much life insurance coverage. It’s important to consider the big picture when purchasing life insurance; your future—salary, mortgages, family obligations, debts—could be drastically different than what it is now, and you want to make sure you plan ahead to leave your family with financial security.
Keep reading to determine if you should purchase $1,000,000 or more in life insurance and how to get the best rates on that amount of coverage.
Quick Article Guide:
1. Do I Need $1 Million or More in Life Insurance Coverage?
2. $1 Million to $2 Million, 20-Year Term Quotes
3. $1 Million to $2 Million in Term Life Insurance Can Actually Be Very Affordable
4. What If I Have a Pre-Existing Medical Condition?
5. How Do I Purchase $1 Million or $2 Million of Universal Life or Whole Life Insurance?
6. How Can Term Life Insurance Find Me Affordable Policies for $1 Million or More in Coverage?
Deciding if you need $1,000,000+ in life insurance coverage might seem like a complicated calculation. Before you start to stress or wear out the buttons on your calculator, consider these 10 circumstances; if you relate to any of these, you may need $1 million to $2 million in life insurance coverage.
1. Life Insurance as Income Replacement for “Middle Class” Couples
The majority of American couples fall into the middle class range of income earners. Thinking you don’t need at least $1 million in coverage because you’re not a high earner can be a huge mistake – as many as 66% of Americans with life insurance are under-insured! It’s important to take future career promotions and raises into account when you purchase your life insurance now. Waiting until you’re older (and possibly in poor health) to upgrade your insurance amount could cost you much more than if you had just properly planned now.
2. Life Insurance as Income Replacement for High Earners
If you earn more than $100,000 per year, either as the main income earner or as a combined income, you will almost certainly need a $1-2 million life insurance policy—at a minimum! Most life insurance experts and financial consultants recommend having at least 5-10 times your annual income for your coverage amount. If you make $250,000 a year, you might need closer to $4 million in coverage!
3. Life Insurance as Income Replacement for a Family’s Primary Wage Earner
If you are the primary breadwinner with a stay-at-home spouse or parent, you’ll need enough coverage to ensure your family is able to maintain the standard of living they’ve become accustomed to. A policy in the million-dollar range would take care of your spouse and family and provide them with financial security for several years.
4. Life Insurance for Income Replacement for a Non-working Spouse
On the flip side, you should also consider life insurance for a stay-at-home parent or non-working spouse. Even if a spouse isn’t employed, there is a substantial cost involved with raising a family, and if a stay-at-home parent should die, there will be several expenses to make up for all they did at home, such as transportation, cooking, and child care. Because of the rising cost of childcare alone, $1 million in life insurance on a non-working spouse makes sense.
5. Life Insurance as Income Replacement and Debt Relief
Income replacement is usually the most common reason people buy life insurance, but paying off debt should also be considered. When you die, your debt doesn’t magically disappear; it still needs to be paid off.
And if you don’t factor your outstanding debts into the amount of life insurance coverage you need, the amount of money you thought you were leaving behind to your family could end up being a lot less, since they’ll need it to pay any debt you may still have.
Some current and future debt you should consider might include:
- Rent or mortgage
- Credit cards
- Car loans or leases
- Recreational vehicles
- College tuition for children
- Final expenses
- Uncovered medical expenses for long term illnesses
When you factor all your outstanding debts and combine it with the amount of life insurance coverage you would need as income replacement, a $1 million policy becomes much more of a necessity.
6. Life Insurance to Increase the Value of Your Estate
Purchasing $1,000,000 or more in life insurance coverage can immediately boost the overall value of your estate and what you leave behind to your heirs. This is a simple way to take care of your loved ones and gift them with financial security for years to come.
7. Life Insurance to Create a Liquid Estate for Tax Purposes
Depending on your financial circumstances and lifestyle, you might very well have an estate worth $5 million or more. An estate includes all the property you own at the time of your death, including:
- Real estate
- Personal property
- Intellectual property
As of 2018, estates with a value of $11.2 million or less are exempt from Federal estate taxes; however, estates that are valued above that may be subject to a 40% tax rate! There are also several states that will tax an estate that’s worth as little as $1 million.
Most estates will not have much in liquid assets, which means that in order to pay the estate taxes, your heirs will have to sell off pieces of your property. By purchasing $1-2 million in life insurance you’ll be providing liquid cash for your beneficiaries to pay the estate taxes with, and be able to preserve your estate, leaving what you had intended to your loved ones.
8. Life Insurance for Key Employees
If you’re a small (or medium) business owner, it’s very likely that you have at least one or two key employees whose skills and abilities are essential to the success of your company. The loss of that key employee could result in the loss of sales revenue, current clients, and even the business’s ability to operate. There would also be rehiring costs, including time spent recruiting and training.
Losing such a valuable employee could easily cost your business $1 million or more, and purchasing a life insurance policy for that amount could keep your business afloat in the midst of a difficult time.
9. Life Insurance for Business Partner
If you are half of a partnership, you and your business partner may have discussed a Buy-Sell Agreement. With this, you would have the opportunity to buy your partner’s shares in the business if they died. The easiest way to fund the purchase of those shares is through a life insurance policy. Because a successful business may be worth millions of dollars, it would be prudent to purchase a life insurance policy of $1 million or more to cover the amount of the shares.
10. Life Insurance to Cover an SBA Loan
If you have any intention of taking out a small business loan for supplies, equipment, renovations, or other tools to help your business grow, you may consider an SBA loan. In order to get approved for an SBA loan—which can easily be in excess of $1-2 million—you need to be insured for the equivalent amount of life insurance.
Now that you know there are plenty of reasons to purchase $1,000,000 or more in life insurance, you should know that a policy for that amount doesn’t have to break the bank.
Here’s an Example of a Client We Recently Helped:
Last year we worked with a 40-year-old husband and father named Bruce. Bruce makes an annual salary of $80,000, but with 2 young children, bills, and a mortgage, he didn’t know if he could afford the amount of coverage he needed.
Bruce wanted to leave his wife enough coverage to replace his take-home income for 20 years, and settle all of their financial obligations (mortgage, bills, college tuition for their children, etc.) if anything should happen to him.
Like most men in Bruce’s age group, Bruce isn’t in prefect health. His doctor told him he needs to lose 20 pounds to reduce his risk of diabetes, and he takes a blood pressure medication to control his hypertension. Despite these minor health issues, we were able to secure a $1,000,000, 20-year term, for only $51.17 a month!
These quotes are for a non-smoking individual in excellent health for a 20-year term. The use of medications or a concerning health history can have some affect on the premiums.
Sample Monthly Rates for a 20-Year Level Term – Male
|30 Years Old||$33.97||$63.21|
|40 Years Old||$51.17||$97.61|
|50 Years Old||$142.33||$279.37|
|60 Years Old||$396.03||$787.33|
|70 Years Old||$1,555.62||$3,105.70|
|80 Years Old||$5,209.20||$10,418.40|
Sample Monthly Rates for a 20-Year Level Term – Female
|30 Years Old||$28.81||$52.25|
|40 Years Old||$43.43||$82.13|
|50 Years Old||$101.91||$199.09|
|60 Years Old||$267.03||$529.33|
|70 Years Old||$1,048.25||$2,088.63|
|80 Years Old||$3,091.00||$6,182.00|
*Monthly rates are displayed for illustrative purposes only and are accurate as of 10/09/2017.
The good news is that you can still qualify for a preferred class even with if you have a preexisting medical issue, such as the case with controlled hypertension and cholesterol. Even if you have well-controlled diabetes (and no other medical conditions), you can still qualify for a standard rate class—possibly even preferred if it’s a recent diagnosis over the age of 55 with a low A1C!
- Heart disease (stents, bypass, heart attack, etc.)
- Hazardous hobbies or occupation
- Some international travel
Guaranteed universal life insurance is similar to whole life insurance, but with typically lower rates and without the cash value accumulation. With this type of policy, you pay the lowest amount possible (only the cost of insurance) to provide guaranteed coverage for life.
With whole life insurance, you’re paying extra for premiums that can build up a small cash value overtime. We typically recommend guaranteed universal life insurance over whole life, because whole life insurance is about 2 to 3 times more expensive. Rather than overpaying for your life insurance each month, your better off saving the difference.
We’ve provided some sample quotes by age for $100,000 to $1,000,000 of guaranteed universal life insurance below:
Level Rates and Coverage to Age 90 or Later – Female (Guaranteed Universal Life)
Level Rates and Coverage to Age 90 or Later – Male (Guaranteed Universal Life)
*Monthly rates are displayed for illustrative purposes only and are accurate as of 10/09/2017.
If you would like a quote for whole life insurance, give us a call at: 855-902-6494, and we’ll be happy to compare your options and provide you with rates.
A million or more in life insurance coverage may seem like a lot, but once you consider your debts and income, it might very well be the amount of coverage you’ll need to keep your family financially secure. If you are looking to purchase $1,000,000 or more in life insurance, we can help you! Our experienced agents can shop more than 60 top-rated life insurance companies to find the best option for you. Our service is free, and there is no cost to apply for coverage.
We are an owner-operated agency that is licensed nationwide and all of our agents have at least five to ten years of experience in the life insurance industry. We’re small enough to care, and big enough to help. Give us a call today toll-free at: 855-902-6494, or request a free life insurance quote online below to shop rates from dozens of companies in less than a minute.