When you’re looking to get life insurance, there are dozens of different factors that you’ll need to consider to ensure that you have the perfect amount of coverage for your family.
We know that finding the perfect life insurance plan can be a long and difficult process, but it doesn’t have to be. For many people, the thought of purchasing $1 million or $2 million in term life insurance may seem like quite a lot.
But in reality, it really isn’t all that much when you think about just how much a life insurance policy’s proceeds may actually have to cover should the unexpected occur.
Is $1 Million Life Insurance Too Much?
For example, if you think about a young family where the husband is currently earning $50,000 per year, he needs to really think about how much he would need to leave to his wife and children should something happen to him.
First, he would need to consider the amount that would be required to replace his income for an indefinite period of time. With this in mind, funds would be needed to pay ongoing living expenses month after month, year after year, for the mortgage, utilities, food, and other living expenses.
He must also consider future expenses, too, such as the cost to educate his child (or children), given the high cost of college today – and how much it may cost in the future when his children will be ready to attend. This being the case, the husband would likely need to have at least $1 million in coverage placed on his life.
$1 Million Term Life Insurance Replacing Salary
If that $1 million in proceeds was paid out in the event of his death, and if it was able to generate 5% in income, his surviving wife could essentially live off the interest ($50,000 = $1 million X 5%) without depleting the principal amount.
However, because today generating 5% safely is fairly unrealistic, it could be argued that the husband would likely need to have even more life insurance coverage placed on his life. If, for example, the husband had $2 million in coverage instead, it would be more realistic for the wife to find a way to safely generate $50,000 in replacement income from this amount of proceeds.
When the situation is turned around and we consider losing the wife to an unexpected illness or accident, there could also be a case made for having at least $1 million or more in life insurance proceeds as well.
For example, even if the wife was a stay at home spouse who was raising children full time, the cost to replace all of the duties that she does could easily exceed $40,000 or more per year when factoring in childcare/nanny, cooking, cleaning, carpooling, and the many other tasks that would need to be hired out to someone for pay.
Given these examples – and seeing just how much in proceeds would essentially be needed if either spouse was lost – $1 million to $2 million in term life insurance does not really seem so far fetched. Looking to purchase a life insurance policy for your parents or even FEGLI life insurance? We can help with those as well.
Will You Qualify For $1 Million To $2 Million In Term Life Insurance?
Once you realize how much in coverage will be needed to truly cover ongoing needs with life insurance, the next step is seeing if you will qualify. If you have questions about how the return of premium life insurance works, we can help answer your questions.
The best way to do this is to fill out the application for coverage. When applying for this amount of life insurance coverage, you will typically need to go through with what is referred to as fully underwritten insurance.
This means that in addition to filling out an application for coverage, you will also be required to take a medical examination.
This will entail meeting with a paramedical professional who will take blood pressure and heart rate reading from you. You will also need to submit a blood and urine sample. These samples will be analyzed for certain types of health conditions that may cause risk of claim to the insurance company.
If you have certain types of health conditions such as diabetes or arthritis, then it is likely that you will also be required to fill out an additional health questionnaire. Here, you will be asked more in-depth questions about your condition.
This way, the life insurance underwriters will be able to get a much clearer picture of your overall health, as well as how you are controlling or managing your condition. Once all of your information has been received and reviewed by the underwriters, they can make a final determination about your policy.
If you are in exceptionally good health, then it is possible that you may qualify for a Preferred policy.
This means that the premium rate you will be charged will be less than the average policyholder who is in the same policy class, age, and weight. If, however, you are of average health, then you will typically receive a Standard rating on your policy. This means that you will pay the same rate as other average policyholders in your same policy classification.
Likewise, if your health is not great, you may receive a Substandard rating on your policy, meaning that the life insurance company is actually taking more of a risk on accepting your application for coverage.
High-Risk $1 Million or $2 Million Life Insurance
In order to compensate for this additional risk, you will be charged more in premium for your policy. Should you be accepted for a $1 million to $2 million term life insurance policy, it means that you will have coverage that constitutes pure death benefit protection for a certain length of time, with no savings or cash value build-up that is associated with the policy.
Typically, term life insurance policies will have coverage lengths that run from just a few years up to 30 years. Once that coverage length has elapsed, if you wish to continue your coverage, you will need to renew it at your then-current age and health condition.
At that time, your premium will likely be much higher. At the present time, however, term life insurance is almost always the cheapest way to go, meaning that the quotes for $1 million to $2 million of term life coverage will likely be much lower than for comparable permanent life insurance coverage.
What About Permanent Million Dollar Life Insurance?
Rather than purchasing $1 million to $2 million in term life insurance, you could alternatively purchase a permanent life insurance policy. These policies have both a death benefit component and a cash value or savings component.
This cash is allowed to grow on a tax-deferred basis – and over time, it is able to grow significantly. The policyholder is allowed to take cash from the insurance policy, via either loan or withdrawal, to use in whatever way that he or she sees fit.
Because of the death benefit and the cash value/savings components, the premium will be much higher on a permanent life insurance plan than for a comparable term life insurance policy. However, unlike a term insurance policy, a permanent life insurance policy will have no set time limit on it.
This means that the policy never expires (provided that the premiums are paid) and the premiums do not increase – meaning they are locked in for the life of the permanent life insurance policy.
Permanent $1 Million Life Insurance
For an individual who plans to keep his or her life insurance for more than just 20 or 30 years, a permanent life insurance policy may be the better alternative. There are many different types of permanent life insurance policies to choose from.
These can include whole life insurance, universal life insurance, variable life insurance, and variable universal life insurance. There are also newer types of permanent life insurance such as indexed universal life insurance that are available in the market today as well.
These plans are going to be much more expensive because of the permanent coverage that they offer. You can’t put a price tag on the peace of mind that life insurance will give you.
These whole life insurance plans are an excellent option for anyone that doesn’t want to lose coverage in the future or have to worry about reapplying. Each kind of whole life insurance is going to offer different advantages and disadvantages that you should consider.
Getting An Affordable Million Dollar Life Insurance Policy
When you apply for a one million dollar or two million dollar life insurance policy, you may assume that the premiums are going to be through the roof, but in most cases, these plans are going to be much more affordable than you would guess.
With a term life insurance plan, you’ll be able to get quality life insurance at a reasonable rate, but there are some ways that you can get your premiums even lower and keep more money in your pockets. Making a few simple lifestyle changes can have a huge impact on your life insurance policy.
Before the insurance company approves your application, they are going to require that you take a medical exam to get an overall picture of your health and determine how much of a risk you are to insure. The higher the risk you are, the more they are going to charge you for the plan.
If you want to get better rates, you’ll need to get better results from the medical exam. But if your health is an issue, there are companies who offer life insurance with no exam required, so don’t let anything stop you from getting the coverage you deserve.
Saving Money On Million Dollar Life Insurance
The first thing that you should do is start a healthy diet and get regular exercise. Both of these are going to help you shed any extra weight, lower your cholesterol, and reduce your risk of having diabetes or heart problems in the future.
All of these benefits are going to translate into lower premiums for your million dollar insurance plan. It’s time to dust off those old running shoes and hit the gym. The next way that you can save money is to kick those cigarettes to the curb.
If you’re listed as a smoker on your application, you can expect to pay a lot more for your insurance coverage. Using tobacco drastically increases your chances of having various kinds of cancers, which makes you a much higher risk to the insurance company.
Smokers are going to pay twice as much for their life insurance versus what a non-smoker is going to pay for the same amount of coverage. If you want to get the most affordable life insurance plan, you’ll need to kick the bad habit once and for all.
Independent Life Insurance Agents for Million Dollar Life Insurance
The best way to ensure that you’re getting the best rates is to work with an independent insurance agent. Unlike traditional insurance agents, independent agents don’t only work with one single company. Instead, they represent dozens of highly rated companies across the nation and can bring all of the best rates directly to you.
Working with an independent insurance agent can help save you both time and money on your life insurance application. Every insurance company is different, and all of them have different systems for giving rates and medical underwriting guidelines.
That means that you could receive drastically different rates depending on which company you get the quote from. It’s easy to see why it’s so important to get dozens of quotes before choosing the plan that’s going to work best for you.
Instead of wasting hours on the phone calling different companies, let us do all of the hard work for you.
Where To Obtain Quotes for Million Dollar Life Insurance
When you’re ready to obtain life insurance quotes, it is always best to shop through a company that has access to many different insurance carriers. This is because you will be able to get a non-biased view of the many different policy benefits, and premium prices, that are ultimately available.
We can even direct you to companies who offer AICPA Life Insurance if that is something you are interested in. In doing so, we can help.