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 Dollars Of Life Insurance?
A cool $1 million wired to you from your life insurance company.
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.
How Much Life Insurance Coverage Do You Need?
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:
... 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.)
How We Conducted Our Analysis
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:
- The life insurance product quoted
- The companies surveyed
- 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 coverage.
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: 15 Online & Traditional Insurers
We collected quotes from 15 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.l/
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:
Note: Many life insurance companies use health questions like these 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.
$1 Million Life Insurance Policy Premiums For Men
Now for the good stuff: actual life insurance quotes (from Quotacy.com) for the 11 companies we surveyed.
We’ll look at the cost for male policyholders in this section, and for females in the following section.
Male Life Insurance Rates (Ages 30-65) For A $1 Million Policy
|30 y.o.||40 y.o.||50 y.o.||60 y.o.||65 y.o.|
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.
$1 Million Life Insurance Premiums For Women
And now for the women he rates that you’ve been waiting for.
The table below shows the monthly premiums for 30- to 65-year-old women for a million dollar policy, as quoted by each of the 11 companies below.
Female Life Insurance Rates (Ages 30-65) for a $1 Million Policy
|Logo||30 y.o.||40 y.o.||50 y.o.||60 y.o.||65 y.o.|
Takeaway #1: Female Longevitity = Lower Prices
Conclusion & Takeaways
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.
If you are dangerously under-covered at the moment or if you don’t mind spending ~$10 more per month to avoid traditional insurer’s 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 100% online application.
If you have any questions, don’t hesitate to leave a comment or shoot us an email at hello [at] getsure.org.
The GetSure Team