Life is very unpredictable. If you have a family, it’s your job to ensure their financial safety if anything happens to you. This is why people need life insurance.
But how extensive should your life insurance coverage be? Is a million dollars too much or is it just enough to cover all of the expenses? Also, isn’t a sum like that unattainable?
Well, according to Nerdwallet, about 50% of insured Americans are underinsured.
We’re here to answer all of your questions and help you understand the concept of million-dollar life insurance. In this article, we’ll explain:
- What is million-dollar life insurance?
- Why should you get insurance this big?
- What factors determine the size and cost of a life insurance policy?
- How much does a million-dollar policy cost?
- How should you choose a policy?
- How can you own your finances using Infinite banking?
We hope that this article will help you choose the right policy for you and your family while teaching you how to own your finances.
Before we get into more details, we should introduce the concept of million-dollar life insurance.
As you probably already know, investing in a life insurance policy is a way to ensure that your beneficiaries get a death benefit payout if you die during the policy’s term. If you want to gain this benefit, you have to pay monthly premiums to the insurance company, and this process has plenty of other advantages.
The amount of the death benefit can range anywhere from a couple of thousand dollars to multiple millions. This is where the concept of million-dollar life insurance is introduced. To put it simply, million-dollar life insurance is insurance with a death benefit of a million dollars.
This may seem like an unattainable amount, but that’s genuinely not the case. In the rest of this article, we’ll explain the actual cost of million-dollar life insurance and what it entails.
Investing in life insurance is one of the best ways to handle your finances and secure your loved ones’ future. Making sure that the dependents have enough coverage even in case of the policyholder’s death is a serious matter.
Fortunately, there are plenty of life insurance policies available on the market today. But why should you get a policy worth one million dollars? Or even 2 million dollars?
When it comes to the public opinion on investing in life insurance, people deem much life insurance redundant. According to LIMRA’s study, only about 54% of people in the United States have some type of life insurance. On the other hand, most people without an insurance policy state that they don’t want one because the price is too steep or think they’re too young to get one.
However, both of these reasons aren’t based on solid facts. Most life insurance policy costs are less than what you may expect and policyholders can benefit from owning life insurance no matter their age and net worth.
Predominantly, the rule of thumb states that your life insurance coverage should be equivalent to 10 times your annual salary. Regardless of the amount, in the end, the death payout should have to be enough to cover some of the prevailing financial problems that beneficiaries have after the policyholder’s passing.
In case of your death, the beneficiaries, chiefly spouse and children, should have access to enough finances to cover the following expenses:
- Burial and final expenses for the policyholder
- Living expenses, financial obligations, income replacement and child care
- Any debts, including mortgage, medical expenses and private credit card debt
- Future expenses, such as college tuition, business expenses or vehicle replacement
- Future health insurance for a stay-at-home spouse and children
Depending on the total possible amount of each of these points, when you take all of these financial problems into account, you’ll see that the amount is close to, equivalent or even greater than one million dollars.
To put it simply, one million may seem like too much for insurance purposes. Still, when you count in all the possible expenses your beneficiaries will face after your death, it may not even be enough.
This is why one million dollar policies have become the most requested type of life insurance in the United States.
If you aren’t sure about the amount of life insurance you need, it’s handy to utilize one of the plenty of online life insurance calculators. Just type in all the requested information and it will calculate the adequate amount for your needs.
Even though investing in a million-dollar policy is one of the best ways to ensure the financial safety of their beneficiaries in the future, not everyone is eligible for owning one of these policies. Different factors affect whether people can even have life insurance, the amount of said life insurance, and what it will cost.
This is another aspect of determining adequate life insurance where policyholders could use the help of online life insurance calculators.
In this part of the article, we’ll teach you more about qualifying for a million-dollar life insurance policy, different risk classes and determining the correct term length for you.
Not everyone can get the same type of life insurance as others. That is because not all people are the same regarding income, health and other aspects.
There are a couple of factors we can use when determining eligibility for million-dollar life insurance.
Of course, the first aspect of determining the amount of a death benefit the life insurance covers is to look at the policyholder’s income.
The rules generally differ from company to company, but most insurers will let clients get a maximum amount of life insurance between 10 to 30 times their annual income.
To put it simply, even though owning million-dollar life insurance is one of the best investments anyone can make, if the potential policyholder makes $30,000 a year, they won’t be eligible for it.
Age is another critical aspect determining whether someone can become a policyholder and what premium rates they’ll have to pay.
As you’ll see later in the article, when we cover the cost of the million-dollar life insurance, age is undoubtedly one of the most important aspects determining the policy’s cost. The older you are, the more you’ll have to pay for your life insurance policy.
Additionally, women generally pay lower premiums than men because they have a longer life expectancy.
Potential policyholders are eligible for possessing life insurance regardless of their health. However, good health and age are among the dominant factors in determining premium rates. Non-smokers pay smaller premiums than smokers.
This is why it’s best to get a policy the younger you are because you’re likely to have excellent health, meaning that your premium rates will be lower.
Health eligibility for million-dollar life insurance is generally tested with the help of a medical exam. This exam includes testing your blood pressure, blood sample, cholesterol, urine sample, weight and height. Additionally, an EKG may be required if you’re over 40 years old because of the high risk of heart problems.
Another aspect that affects the cost of the life insurance policy is your everyday activities, like your job and habits.
As we all know, some jobs are more potentially life-threatening than others. If your work entails that your life is in danger every day, the life insurance policy premiums will also be higher. This also applies to your other everyday activities, such as your habits and lifestyle.
That being said, non-working spouses can generally get a policy with as much coverage as the working spouse. It-s important to ensure both spouses, no matter who we may think, are in the riskier position.
Term life insurance entails a set period during which the policy is in effect. If the policyholder passes during that appointed period, their beneficiaries will get the death benefit payout.
Of course, the term length also affects the life insurance premiums. The shorter the term is, the less likely the insurer will have to pay the death benefit to the policyholder.
For example, most term lengths are either ten, twenty or thirty years. If we compare the term life insurance rates for these three for the same potential policyholder, we’ll see that the shorter the term length, the lower the rates are. The 10-year term life insurance policy will have lower premium rates than the 20 and 30-year term length.
At the top of this list, we named income as the most crucial aspect that affects the size of the policy and, subsequently, its premiums. However, policy size affects the premiums in different ways.
Your first conclusion is probably that a million-dollar life insurance policy is more expensive than one worth $500,000. That is true. But, it isn’t twice as expensive.
The bigger the policy is, the lower the premiums are based on per-thousand cost. This means investing in a million-dollar life insurance policy is more cost-effective than investing in one with inadequate coverage.
Based on a policyholder’s health and lifestyle habits, the insurer will put them in one of the predetermined groups, also known as risk classes.
Risk classes are based on risk factors, such as blood pressure, cancer history, tobacco history for smokers, driving history, citizenship and substance and alcohol abuse.
All of the factors listed above should be taken into consideration when opting for the proper term length. This is another aspect where online life insurance calculators can help you determine the most suitable term for you.
Also, should you opt for term life insurance at all? Even though permanent life insurance, like Whole Life insurance or universal life insurance, which are another type of policies, are more expensive, they hold more benefits than term life insurance.
Now that we’ve listed all of the factors that affect the life insurance rates, it’s time to take a better look into the prices available on the market. Of course, the price also depends on the insurance company.
One of the most common misconceptions is that a million-dollar policy has an exuberant cost. However, when you consider all of the factors and calculate the monthly payment, that’s not the case.
When we compare costs from a couple of the best life insurance companies with the best rates on the market today, we can see a couple of different scenarios of annual payments for million-dollar term life insurance policies.
For a healthy 25-year-old male, life insurance’s average cost ranges from $260 to $290, while a 35-year-old’s premiums range from $270 to $300. We can see a big jump for 45 year old’s in the range of $585 to $637. Healthy females have to pay around 10% less.
Most people opt for this term, with the price of around $400 annually for a healthy 25-year-old male. A healthy 45-year-old male will have to pay almost $1,200 annually. Female policyholders also spend approximately 10% less than men for this term.
The most extended term policy will cost a healthy 25-year-old man around $650 annually, while a 45-year-old will have to pay almost $1,900 for life insurance. Once again, women have to pay around 10% less than men.
Choosing a life insurance policy is a simple process in general, but here are some of the steps you can take to make it even easier.
As we already mentioned, you can use a life insurance calculator to determine the amount of coverage you’ll need. However, it’s better to contact an insurance agent or a financial advisor for this step.
Once you determine the amount you’ll need, get in touch with a couple of different companies to see what life insurance quotes they have to offer. Don’t just pick the first one that comes to mind.
When you choose a company, you’re required to fill out a form regarding your life. Don’t lie on this form, especially about your health and lifestyle, because the insurer can refuse to pay a death benefit if they determine you were lying.
Most companies also require a medical exam before signing the policy to verify the state of your health. This exam can happen at home or even at your job.
The policy’s underwriting will take about six weeks, after which you’ll be informed about itsTen-year acceptance. Once it’s approved, you can pay for your first monthly premium and successfully start the policy.
Opting for the right life insurance policy is an arduous task you should always spend time on to ensure that you’re making the right decision.
As you can see, possessing a million-dollar life insurance policy is advantageous and attainable for plenty of people. Additionally, this is just the right amount for covering all of the possible expenses for most people.
But what if we told you that there are other ways to ensure your financial freedom while utilizing the advantages of specific life insurance policies?
We’re here to teach you about the concept of Infinite Banking.
This concept can be used to help you secure your financial future and bring you additional benefits. If you want to try Infinite Banking, you first need to own a Whole Life insurance policy. Here are some of the crucial aspects of this concept you should know about.
Infinite Banking is a strategic method for utilizing your Whole Life insurance policy to create an endless banking system. To put it in other words, Infinite Banking means being your own banker.
Owning an overfunded Whole Life insurance policy has many benefits, one of them being that you can borrow money from it using your policy’s cash value and repay it later. This way, you borrow money from yourself instead of a bank, and you pay it back to yourself with the rate of return, thus becoming your own bank.
With the Infinite Banking method, you can access your financial goals and gain complete control of your finances without dealing with banks and fees.
Infinite Banking involves:
- Overfunding (with after-tax funds) a high cash value whole life insurance policy from a life insurance company.
- Accumulation of Cash Value (tax-free) throughout the years you are a policyholder of your Whole Life insurance policy.
- Tax-Free Loans taken out against your whole life insurance policy’s cash value to use for your financial expenses.
All of these aspects culminate in creating your own bank. You borrow from yourself while your Whole Life insurance policy still earns dividends even though you’re using those funds elsewhere.
No matter what your financial objectives are, Infinite Banking can help you reach them. Entering the Banking Business gives you better control over your finances and helps you build wealth using the life insurance policy.
Hopefully, this article educated you about everything you need to know about million-dollar life insurance, including what it is and what its cost depends on. We also hope that it made you interested in the concept of Infinite Banking with Whole Life insurance.
And if you want to learn more about it, we have a great opportunity for you.
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If you want to learn how to do that, watch our free masterclass!