A $1 Million Life Insurance Policy: It costs less than you think

Million Dollar Policy Cost Cover

In this guide, we’ll take a detailed look at the cost of a million dollar life insurance policy for both men and women at a wide range of ages.

We looked at what 11 life insurance companies would charge for a 20-year term life insurance policy with this amount of coverage.  These companies varied from start-up, online-first agents to veteran, established insurance carriers.

To our surprise, a single company emerged as the clear winner and we’ll walk you through how we got there, starting with some background context below.

Who Needs A Million-Dollar Policy?

Too much life insurance or barely enough?

A million-dollar payout.

That’s a lavish amount of wealth when we think of it as disposable income, to spend freely at our heart’s desire. 

When it comes to a life insurance policy’s payout (or “death benefit”), however, it’s almost entirely the opposite.

As we’ll see, a million dollars in life insurance coverage is not at all extravagant. Instead, for many American families, it’s the responsible amount of coverage to carry.

The Purpose Of Life Insurance Coverage

Here’s why you have to think about the death benefit payout from a life insurance policy differently.

When it comes to life insurance, the intent of the death benefit is to pay for:

  • Existing financial obligations (e.g., your home mortgage or student loans, or college tuition expenses for your children)
  • Required living expenses

It’s by no means intended to pay for a new car or to splurge on a vacation. 

The death benefit payout is compensation for the [future] income you lost when your loved one passed away. It's meant to replace, not add to your finances.

Estimating The Right Amount Of Coverage

So what’s the right amount of coverage to buy?

Well, a precise estimate would require a full picture of your future finances.  For example, living expenses projected for 10+ years, future financial obligations, and other items that are clearly impossible to know with certainty.

... Using A Rule Of Thumb

So clearly, this is not an exact science.

And given how many moving parts there are (especially for younger families), it’s often preferable to use a rule of thumb that’s survived the test of time in the life insurance industry:

To estimate your family's life insurance coverage need, multiply your annual household income by 10-12.

... Using A Life Insurance Calculator

For those who (proudly) micro-manage their personal finances, there are several good tools online that can help you estimate your coverage needs on an item-by-item basis.

(My favorite is this insurance needs calculator from LifeHappens.org.)

Context & Assumptions

$1 Million Life Insurance Policy Cost

Before we get into the actual cost of the policy, let’s review the information that was used in generating the rate quotes shown below.  Specifically:

  1. The life insurance product quoted
  2. The companies surveyed
  3. The demographics assumed (age, gender, and health)

1. The Product: 20-Year Term Insurance

There are two types of life insurance: term life insurance and permanent life insurance.

As its name suggests, permanent life insurance provides coverage for the rest of the policyholder’s life.  Whether you live one year or 100 years after you buy the policy, your life insurance company will pay your beneficiaries your policies death benefit when you die.

On the other hand, a term life insurance policy covers the insured for a pre-set period of time, which is referred to as the “term” of the policy.

Once all of these obligations have been met, their need for life insurance is significantly reduced.

2. The Companies: 11 Online & Traditional Insurers

We collected quotes from 11 life insurance companies in total.

We separated these companies into two broad groups: those that offer a 100%-online buying process vs. more “traditional” life insurers, which distribute their products through agents.

100% Online
Traditional

3. The Demographics Assumed

To get each life insurance quote below, we had to answer high-level demographic questions related to the insured’s age, gender, and health.

With regard to gender, we split men and women into separate tables (found in the next two sections, respectively).  And re: age, the table columns reflect the five ages we surveyed: 30, 40, 50, 60, and 65 years.  

Finally, we answered the health questions assuming a policyholder in good health.  This implied the following characteristics:

  • Non-smoker (i.e., no tobacco or e-cigarette use in the past 60 months)
  • Healthy or average build (i.e., Body Mass Index < 30)
  • No current medications for cholesterol or blood pressure
  • No immediate family have died from cancer, diabetes, or heart disease before the age of 65

Note: Insurers use these health questions to give customers a ballpark estimate of their rate. When the policy is fully underwritten, however, most insurers will require a medical exam to have more precise, quantitative health information upon which they can make approval and pricing decisions.

Monthly Rates Men (Ages 30-65)

One Million Dollar Life Insurance Policy (20-Year Term)

Now for the good stuff: rate quotes from the 11 companies we surveyed.

We’ll look at the cost for male policyholders in this section, and for females in the following section. 

one million dollar Policy Rates (Males 30-65)

30 y.o.40 y.o.50 y.o.60 y.o.65 y.o.
$49.16$74.99NANANA
$40.00$81.00$180.00NANA
$44.11$75.93$179.08NANA
$34.37$55.17$176.82$418.34$783.62
$36.40$53.50$141.50$428.00$837.50
$41.76$56.46$168.86$401.56$778.26
$34.12$52.70$159.43$422.87$743.29
$32.36$51.62$138.25$399.74$765.51
$40.64$67.30$176.52$517.08$937.62
$31.86$50.57$136.76$390.91$743.73
$32.24$50.74$138.16$395.51$752.48
$31.38$50.07$162.04$388.32$743.73
$53.81$78.31$174.56$523.69$972.56
$33.45$56.84$176.67$446.98NA
$38.24$55.76$167.64$464.20$811.80

Takeaway #1: Rates Increase Sharply With Age

From these prices, there are two key takeaways.

First, monthly rates increase sharply with age.

Taken over the 15 insurance companies shown above, the average cost for 20 years of coverage was:

  • 30-year-old:  $30 per month or $7,200 in total
  • 40-year-old:  $50 per month or $12,000 in total
  • 50-year-old:  $115 per month or $27,600 in total
  • 60-year-old:  $300 per month of $72,000 in total
  • 65-year-old:  $550 per month or $132,000 in total

Takeaway #2: Online Convenience Has A Price

Second, the three “100%-online” life insurance brokers (Bestow, Ethos, and Fabric) charged considerably higher monthly premiums than the traditional life insurance carriers.

(And these three digital insurers were also the most restrictive when it came to age. Bestow doesn’t offer 20-year term policies to 50-year-olds, and none of them offer 20-year term policies to those above 60.

There are two types of people who will find this worth it:

The first group, of course, is people who value the convenience of doing everything quickly and 100% online.

The second group is the procrastinators.

Online providers can help you at least get some coverage and then you can worry about getting a larger policy later.

Monthly Rates Women (Ages 30-65)

$1 million life insurance policy (20-year term)

Without further ado, the rates that you’ve been waiting for.

The table below shows the monthly premiums for 30- to 65-year-old women for a $1 million term life policy, purchased from one of 11 different companies.

Female Rates (Ages 30-65) for a $1 Million Policy

30 y.o.40 y.o.50 y.o.60 y.o.65 y.o.
$35.83$59.16NANANA
$29.00$65.00$140.00NANA
$38.44$61.74$135.77NANA
$28.77$45.40$112.35$297.63$534.36
$29.50$46.60$103.10$295.40$537.40
$37.76$48.46$115.06$304.06$641.96
$24.90$43.47$108.13$274.28$572.47
$26.12$43.55$102.05$276.72$499.99
$33.76$54.40$126.64$359.70$685.64
$25.41$43.42$99.87$275.70$512.97
$25.71$42.80$100.30$278.12$498.80
$24.89$41.58$96.83$268.82$485.71
$40.69$63.44$134.31$359.19$624.31
$28.27$42.57$100.60$268.89NA
$30.36$47.08$117.48$299.64$527.00

Takeaway #1: Female Longevitity = Lower Prices

Rates offered to women are significantly lower than those offered to men, reflecting the difference in life expectancy between the two genders.

Bottom Line

Here’s the bottom line.

If you give insurance companies more information about your health and lifestyle, they have the opportunity to learn that you are a low-risk applicant and offer you a lower monthly premium rate.

Without this level of detail, insurers use broader, demographic-wide data to make assumptions about your health and lifestyle.  Because they take on additional risk in doing this, they have to charge you a higher premium.

So, if you are dangerously under-covered at the moment and/or if it’s worth it for you to spend $10 more per month to avoid the longer application process of a traditional insurer, then we highly recommend going with one of the three online carriers (we recommend Health IQ, and you can find our full review of each of them here: Bestow, Fabric, and Health IQ).

If that’s not a worthwhile trade-off for you, go with one of the traditional carriers in the above rate table.  We highly recommend Haven Life (the online face of MassMutual), which is the only traditional carrier that offers a fully online application.

If you have any questions, don’t hesitate to leave a comment or shoot us an email (hello@getsure.org).

Warm Regards,
The GetSure Team 

References

RJ

RJ

RJ is the Founder & Head of Content at GetSure. He is a licensed life, accident & health insurance agent, with over 10 years of experience in the financial services industry. He holds a B.S. in Applied Mathematics from Columbia University and an MBA from The Stanford Graduate School of Business.
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