The Million Dollar Life Insurance Policy: Not Just For Millionaires

by Bestow Team | February 16, 2022

7.5 Minute Read

To most people, the idea of a million dollars can feel kind of abstract, like the grand prize on a TV game show. But when it comes to making real life financial plans, like figuring out how much life insurance coverage you might need to take care of your loved ones, that number can start to feel a little more real. 

What is a million-dollar term life insurance policy?

If you’ve accumulated a vast stash of cash and assets throughout your life, congrats! You can probably stop reading this article now. But the reality is most people don’t have that luxury. If that sounds more like you, a life insurance policy could be one way to offer some financial protection to your loved ones should you unexpectedly pass away. 

Regardless of which life insurance company you choose to work with, you’ll want to make sure that the policy you select has a payout amount that meets the needs of your loved ones. A payout, also known as a death benefit, is the agreed upon amount of money your beneficiaries will receive from an insurer upon your death. 

If you go with a million-dollar term policy, the death benefit would be (drumroll please) $1 million. While not everyone needs that much coverage, if you’re a middle-income household, it’s something you may want to investigate. Once you stop to add up your expenses (both current and future), you may find a $100,000 or $200,000 policy to be inadequate depending on your family’s financial situation. 

Eligibility for million-dollar life insurance

The good news is, whether it’s a $500,000 policy or a million-dollar policy, qualifying is the same either way. The primary difference is the premium — a higher value policy will likely cost more in premium payments. Insurance companies typically look at age, general health, and habits to determine eligibility. 

If you’re on the younger side of life and in good health, you’re off to a great start— higher coverage is often more accessible for younger demographics. 

But older applicants shouldn’t panic. Qualifying for life insurance is a multifaceted formula. Chances are, older applicants earn more in salary or wages than younger applicants, and this can be taken into account. Some insurance companies will offer policies ten to thirty times your annual salary. 

Get an instant quote for term life insurance, no medical exam required.

Do you need a million-dollar life insurance policy?

Selecting a life insurance policy and determining what’s best for your family is a big-deal decision. We’re not here to make those choices for you (wouldn’t that be nice?), but we can offer some guidance to help you narrow down your range of optimal coverage amounts. Consider these questions:

  • Are you the household breadwinner? Think of the people you are planning on naming as beneficiaries. If these loved ones count on you as the main family income earner, consider coverage that is five to ten times your annual salary.
  • What are your monthly expenses? Examine your lifestyle. Some families live frugally while others have higher daily living expenses. 
  • How much do you pay for housing? Whether it’s a mortgage or rent, you’re likely shelling out some sort of monthly payment for your home base. 
  • Do you have children? This is a biggie. If you have young children, consider the cost of childcare should you pass away— college tuition and major life expenses like braces and first cars.
  • Where are you at with your student loans? Speaking of college tuition, if you are still paying off student debt, it’s something to factor in when calculating your ideal death benefit.
  • Are you carrying additional debt? If you have credit card debt, car payments, or long-term loans, you’ll want to consider the cost of paying those off.
  • Will you have an extravagant funeral? Some people want an extravagant send-off. If that is the case for you, add this to your coverage consideration column.
  • What about investments? Small business owners and investors should factor investments into their payout selection process.

Your ultimate goal is to make sure that your family has some financial resilience should you unexpectedly die. It’s unpleasant to think about, sure, but thoughtfully preparing for the worst is one of the greatest acts of love you can offer your family and friends. 

Real-life scenario

To put it into some real-life terms, we’ll introduce you to our new (hypothetical) friend Penelope.

Penelope loves yoga, suspense novels, and golden retrievers (she has three of them). Penelope’s younger sister just bought a life insurance policy and now Penelope is realizing she needs to do the same.

Let’s take a peek into Penelope’s personal life (she’s a fictional character, it’s fine!):

  • She is her family’s primary earner, making $160K per year as a dentist.
  • Her partner is a stay-at-home parent to their two toddlers and three dogs.
  • They live in a 4-bedroom house and have a $2100/mo mortgage payment.
  • Penelope drives an electric vehicle and has a $500 monthly car payment.
  • She still has $20,000 in student loan debt to pay off (sound familiar?).
  • Penelope and her partner are carrying around $2,000 in credit card debt.

Penelope wants to set her family up to live comfortably should anything happen to her. She makes a list of her family’s total income, savings and investments, debt (car, house, student loans, etc.), the amount of money she thinks the twins will need for school, and then she factors in the cost of her funeral.

Penelope’s coverage considerations

Penelope and her partner decide that should Penelope die unexpectedly, her partner would need enough income replacement to get through five years. Using the information below, they determine that as policyholders they will need around $1,074,000 in coverage on Penelope’s life.

  • Annual income: $160,000
  • Additional savings: $33,000
  • Total debt: $197,000
  • Final expenses: $5,000
  • College tuition: $100,000

Estimated cost of million-dollar term life insurance policy

AgePolicy ValueTerm LengthPremium
25$1M30 years$44.33/mo.*
30$1M30 years$51.83/mo.*
35$1M30 years$61.00/mo*

*Estimated quotes based on healthy female non-smoking Bestow applicants as of 8/30/22.

Do you need to take a medical exam?

Many life insurance policies require a comprehensive medical exam and blood test to qualify for coverage. As a rule of thumb, the best premiums and life insurance coverage options go to the healthiest people. Insurers might look at your nicotine use (or lack thereof), blood pressure, and cholesterol levels, amongst other factors. 

Some companies do let you skip this process, though. Bestow lets you apply for term life coverage without any medical exams. Instead, you’ll answer general questions about your health, medical history, and lifestyle to help determine your eligibility. 

Financial resilience for the ones you love

There’s no magic wand you can wave to show you the best life insurance companies. Rather, you should set aside some time to do your research and think about what’s best for your family’s unique needs.

Consider starting your journey with a fast, free quote from Bestow for term life insurance. If you like what you see, you can apply for a million-dollar policy online. It only takes a few minutes, and you could have coverage today, upon approval. 

Whether it’s a million-dollar policy or a $200,000 policy, the important thing is making sure you feel comfortable with your choice, and that you can rest a little easier knowing you’ve got a future plan in place to help offer your family some financial resilience.