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- Up to $10 million in coverage
- Skip the medical exam
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When you’re trying to work out how much coverage to buy, take two factors into account: Your financial obligations and your salary. While a million dollars seems like a lot of money, it’s not that crazy if you’re a high earner and have a mortgage, kids or debt to pay off. And since life insurance is relative to your income, a $1 million policy can be surprisingly affordable.
Life insurance rates are personalized, and your premium is a product of your gender, age, health, lifestyle, occupation and hobbies, and the length of your policy. The younger and healthier you are, the lower your rate will be.
You might think a $1 million policy is extremely expensive — but that’s not always the case. For a 20-year term life policy, a nonsmoking 30-year-old man in perfect health might pay $47.48 a month for coverage, while a woman might pay $37.02 a month. For smokers, the rate climbs to $153.90 a month for a man and $125.15 a month for a woman.
*Based on sample rates from Policygenius from 10 major insurers, August 2019
To determine if you’re qualified to get a $1 million policy, your insurer will look at your age and salary. First up: age. Typically, the younger you are, the higher your coverage eligibility will be. This is because your earning potential and financial obligations increase as you age.
Next: salary. Insurers use your income as a barometer for coverage. Most carriers will approve coverage for 10 to 20 times your salary. So, if you earn $100,000 a year or more, you should qualify for a $1 million policy.
To break this down even further, if you’re employed by a company, you have a much better chance of securing a million dollars of coverage. Life insurers believe they’re taking on more of a risk with self-employed workers, so it may be a little harder. And it can be even more challenging for students and stay-at-home parents.
Through with some insurers, like Fabric, Haven Life or Principal, you may be able to get $1 million coverage without taking a medical exam. The process may involve an online questionnaire, agent screening, or a phone interview. But there are a few catches: These types of policies are generally only open to people between the ages of 18 and 60, and are exclusively available for those in great health. If a company catches any medical conditions — even minor ones — in its screening process, you’ll probably have to take a medical exam.
If you’re in good health and have the time — and inclination — to take a medical exam, you’re more likely to get a better deal. No-exam policies are much quicker to secure, but that convenience comes at a hefty cost in the form of high premiums.
Generally speaking, you should carry enough coverage to replace your income for five to 10 years. So, if you earn around $100,000 a year, a $1 million policy might be a good fit. In other words, assess everything you pay for now, and everything you’d need to pay for in the future.
Income aside, your life insurance policy should also cover your financial obligations. This might include a mortgage, student or car loans, credit card debt and the cost of sending your kids to college. When you do the math, if your financial responsibilities reach — or exceed — $1 million, it’s definitely worth looking into a $1 million policy.
The main factors to consider include:
Whenever your circumstances change, it’s a good idea to reassess your life insurance coverage. So if you’ve gotten married or divorced, received an inheritance, bought a new home or became a grandparent, you may find that you need more protection.
On the flipside, be careful about buying too much life insurance. If you’re still working your way up the career ladder or have very few financial obligations, you may not need $1 million of coverage.
So, do you need a $1 million life insurance policy? To decide, weigh up your current and future financial obligations against your salary. A million dollars seems extravagant, but it may not be when you factor in your income, dependents, debt, estate and the cost of living .Before committing to coverage, compare life insurance companies.
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