The cost of annual or monthly premiums for a million-dollar life insurance policy depends on multiple things. Some you can control, some you can’t. They include your age and your gender, your overall health status, your lifestyle and occupation and the type of policy you want.
There’s no “one-size-fits-all” policy for any life insurance product, including those that pay $1 million or more in death benefits. Do your due diligence and research all your options. Let’s look at some of these elements.
Age and Health
Younger people will see lower premiums with excellent overall health than people who are older and have pre-existing medical conditions. Common pre-existing conditions include heart conditions, obesity, high blood pressure, and diabetes. If you’re looking to buy a million-dollar life insurance policy at a low rate, it pays to stay fit and to see a doctor for regular medical exams. Documentation from doctor visits helps insurance companies document your good health — and any pre-existing conditions.
Older people pay higher premiums for health coverage because they usually require more medical care. Federal regulations place caps on rates that insurers can charge for individual Affordable Care Act (ACA) plans, and some states regulate health insurance premiums even more. You may need to undergo a medical exam as part of the life insurance application process. A few plans promote the fact that they require no medical exam for someone to secure life insurance.
Gender
Gender is an underwriting factor for many life insurance policies — but not all. Some state governments consider gender-based pricing discriminatory and prohibit the practice. For states that base premium rates on gender, women enjoy lower rates than men.
However, while women may benefit from lower premiums initially, they may be subject to rate increases if they develop certain medical conditions or engage in risky behavior such as smoking or drinking alcohol excessively. Some insurers offer discounts for couples who purchase joint policies.
Type of Policy
There are two primary life insurance policy types to consider:
- Term life insurance
- Permanent life insurance (or whole life insurance)
It’s important to understand the benefits of each before deciding on which type of policy best meets your needs.
Term life covers someone for a fixed period, usually 10, 20, 25 or 30 years. Premiums associated with term life are lower than for other forms of life insurance. But once the term expires, coverage ends. Term life policies have no cash value benefits associated with them.
Permanent life provides protection for an indefinite period and includes a cash value component that grows as the policy ages. This policy is more expensive because of its increased flexibility and potential for building cash value. But the expense brings more features, such as long-term care or disability riders, which provide financial protection should an insured individual become disabled or require long-term health care.
As you consider these two policies, think about your budget, credit card debt, living expenses, financial goals and the type of coverage you need. Research your options and contact multiple life insurance companies to shop prices as you look at cost efficiency and quality coverage.
Lifestyle and Occupation
When shopping for a million-dollar life insurance policy, it’s important to consider lifestyle and occupation factors. Profession, high-risk hobbies, smoking, drinking, and travel can all have an impact on premiums.
Your profession can be a major determining factor in the cost of your million-dollar policy. People who work in dangerous or high-risk jobs will pay higher premiums than those with more sedentary occupations.
Smoking and drinking habits also influence premium costs. Smokers pay more than non-smokers because of their increased risk of developing health problems such as cancer or heart disease. Similarly, people who drink excessively may pay more because of their increased risk of developing alcohol-related illnesses, including liver disease and diabetes.
Coverage Amount and Length of Policy
How much coverage you want and how long the policy is in place are two other key factors that determine the cost. Term life insurance rates rise as the term length increases. The longer the term, the more expensive it will be. When determining a coverage amount, it’s important to consider your current financial obligations (college tuition, retirement costs, balloon payments, etc.).
When selecting a policy term length, you have several options. Short-term policies range from one to five years in duration, providing temporary coverage at lower premiums than those offered for longer-term policies.
Long-term policies can last 30 years or longer with whole life insurance as long as you keep paying your premiums. These policies have higher death benefits, but because of their longer duration, they also come with higher premiums.
It’s important to review your policy regularly — every three to five years — to ensure the coverage you’re paying for still reflects your needs. Life events like marriage, having children, job changes or retirement may require an adjustment in coverage amounts or term length. You will pay good money for your policy. Make sure it works for you as your life changes.
