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Do You Need a Million Dollar Life Insurance Policy? – The Dough Roller

As morbid as it sounds, if something happened to you and your family needed to face a future without you, your life insurance policy is your safety net. In most cases, your life insurance coverage should be at least five to ten times your annual salary. This is to make sure your family can survive the next five to ten years without you.

And if you don’t make that much money, but you have debt or other financial obligations, you might actually need a million-dollar policy (or more).

However, with life insurance, “more is better” is not always the right mindset. A million dollar policy is expensive, and you might not know if you even need it.

It’s all about the right balance: too little insurance coverage can leave your family uninsured, but too much coverage might make you allocate too much of your budget to your insurance.

A million dollars might seem extravagant, so you might be wondering: Do you need a million-dollar life insurance policy?

If you want to ensure that your family is covered after you die, it might be the best choice. So in this article, I’m going to unpack this a bit more so you can determine if this much coverage is actually needed or not.

Table of Contents:

What is a Million-Dollar Life Insurance Policy?

A $1 million life insurance policy works just like one of lesser value. It’s a contract with a face value of $1 million made in exchange with your insurer.

You pay your regular fees, typically monthly. In exchange, your insurer agrees to provide payment to your family and other loved ones if you pass away. This monetary amount is tax-free and comes as a lump sum.

If you die while the contract is still in effect, your beneficiary (or beneficiaries) receives $1 million. When buying your policy, you get to select who your beneficiaries are. Often, you’ll see a spouse, children, or parents as beneficiaries (or some combination of the three). However, it’s up to you to choose who you’d like to receive your benefits when you pass away.

When purchasing a large policy like this one, it’s essential to talk with your tax advisor or a financial expert to understand all the financial details.

The Cost of a Million Dollar Life Insurance Policy

Like any other form of insurance, a life insurance policy considers several variables. The first of these is the type.

There are two main types of life insurance you can choose:

  • Term – This is the most affordable insurance because it covers death benefits only. This can vary from one year to 30 years or more. Premiums for this type are fixed, but the policy is renewable. Most insurers will allow you to convert to a more permanent form of insurance if you want to, such as whole life insurance.
  • Permanent – Comes in three types: Whole, Universal, and Variable. There are several options regarding these policies, and it all depends on the insurer, so contact your insurer and review policies carefully to know what you’re purchasing. These aren’t as affordable as term life insurance because you are not only getting death benefits, but they can also have a cash value accumulation feature.

Other factors go into creating your unique quote, and most of the time, insurers use complex algorithms to determine what your premiums will be. Here are some of those factors and why they matter when calculating life insurance costs.

Age and Health

Older adults will pay more for new life insurance because, unfortunately, they are likely to die sooner. Life insurance companies are a business; first and foremost, they need to make money.

Premiums are based on the likelihood of you paying your policy’s claim so younger adults get lower rates because they will (likely) be paying it for a long time.

For the same reason, your overall health is considered. Life insurance applicants with pre-existing conditions and other conditions that could shorten their lifespan are going to pay more, since they have a greater likelihood of making a claim. Large policies could even be restricted to shoppers outside of these health classes.

For more expensive policies, such as a million-dollar one, your age is even more important. Say you’re 35 years old, and you want to purchase a 30-year policy. The insurer would not offer the same term to someone 60 years old because they’re more likely to pass away before the term is over.

In most cases, if you’re under 40, you can get up to 30x your annual salary in coverage, whereas if you’re over 60, most life insurance companies will only provide 15x your income.

Lifestyle and Occupation

Your lifestyle also plays a big part in your policy, too, regardless of whether it’s for $1 million or less. Underwriters will determine the level of risk that your life insurance policy presents.

In applying for life insurance, underwriters will look at how old you are, as well as your health, lifestyle, and occupation. Health IQ, for example, gives lower rates exclusively to those who live healthy lifestyles based on their health and health literacy.

Those in more dangerous or physically demanding professions (roofers, construction workers, truck drivers, etc.) are going to pay more. This is because the odds of dying on the job are greater.

Traveling jobs such as contractors or salesmen also have higher life insurance premiums since the odds of things like a car or plane crash are more likely when traveling.

Underwriters consider your hobbies as well. If your hobbies include chess and computer coding, you probably don’t pose much of a threat. However, if your hobbies include skydiving or horseback riding, your underwriter might consider those and raise your premiums.

Smoking also increases your premiums, so it’s advisable to quit before you purchase coverage.

Family History

Family medical history also affects your rates. If your immediate family, such as a parent or sibling, has suffered a serious medical condition, your rates may go up. This is simply because there’s a greater chance that you’ll fall victim to the same medical condition.

To clarify, the insurance company won’t care if your mom fell down the stairs when you were eight and broke her foot. It will care if she has a history of diabetes or ovarian cancer. It won’t care if your brother got into a fight with a lawnmower and lost his index finger, but it’ll care if he’s prone to seizures or has epilepsy.

Underwriters may seem cold-hearted, sitting behind desks calculating how long they expect you to live and then charging you more if they think you’ll pass away early, but life insurance is a business.

The alternative is charging everyone the same, regardless of their lifestyle and health. However, insurers don’t believe this is fair to all of their customers, and so it evaluates each policyholder individually.

All this information does not mean you should lie on your life insurance application to get better rates. If it comes out after you die you skated over any medical problems or lied about your profession, it might be considered a breach of contract. Your beneficiaries may not receive their payout. Be honest, so your loved ones get the million dollars you want them to receive.

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So Do You Need a Million Dollar Life Insurance Policy?

To answer the original question, you’ll need to look at every aspect of your finances and lifestyle. Your exact coverage should depend on several factors that I’ve already listed, plus things such as:

  • Dependents
  • Dependents’ education and other plans
  • Financial obligations such as debts
  • End-of-life and funeral expenses
  • Family’s day-to-day living expenses
  • Future goals and aspirations such as homeownership or charitable giving

After considering everything, you may realize you don’t need a million-dollar life insurance policy. If you don’t earn six figures, have no children, and have no financial obligations, a $500,000 policy might be the right amount for you without emptying your pockets each month.

But certain markers can identify if you need a million-dollar life insurance policy. These include things such as:

  • If you earn a high salary, at least $90-100k+
  • If you live an expensive lifestyle, you’d like to maintain for your family
  • If you have a desire to leave a large inheritance for your children and family
  • If you face an estate tax and need high liquidity
  • If you own or are a partner in a small business

If you have these markers, you might want to consider a life insurance policy for $1 million or more.

One thing to consider that most people don’t think of is philanthropy. Most charitable individuals want to donate to a cause of their choice, but don’t do so in their lifetime for various reasons.

If you have a million-dollar life insurance policy, you can also have a charity be the beneficiary of your policy — which actually provides a tax break to your estate.

You can allocate a predetermined amount for your charity, or you can administer the entire amount to the charity of your choice.

Overall, I’d say you need to consider every facet of your lifestyle to determine if you require a million-dollar life insurance policy.

In addition, make sure to consider the following:

  • Occupation
  • Hobbies
  • Health
  • Life Plans

When you consider these factors, you’ll be well on your way to figuring out the best life insurance plan for you.

Where to Shop for a Policy

Best 1 million Dollar Life Insurance Policy

Haven Life

Haven Life is an online life insurance provider that offers term life insurance. Haven was one of the first life insurers to operate solely online. Their primary focus is to provide a high level of quality at an affordable price. Compared to some others on this list, Haven’s application takes a bit longer. However, it tends to be worth it since we’ve seen that they offer some of the lowest prices possible – especially for a provider that does not require a medical exam.

Haven Life offers policies up to $3 million if you’re at or under 59 years old. If you’re between 60 and 64, you may still qualify for up to a $1 million policy, but coverage amounts will vary based on various factors. Check out our full review of Haven Life for more information.


Bestow is another online-only life insurance provider. They offer term life insurance with coverage amounts as low as $50,000 and as high as $1 million. You can find terms of two, 10, and 20 years (note that the two-year term is unique and might be a good option for some people who just need short-term coverage).

You can do the application entirely online and have a quote within minutes. What’s even better is that you won’t have to do a medical exam since Bestow uses AI algorithms to determine your rates. So if you’re approved, you’ll not only get a quote in minutes, but you’ll also have life insurance set up within a matter of minutes, too. Make sure to read our complete review of Bestow for more information.


Policygenius is an insurance aggregator that allows you to do a single application and get quotes from various life insurance providers. Their online application is easy to get started – you just answer some health-oriented questions and provide some basic information like your name, age, height, weight, etc.

From there, the site will present you with a list of insurance providers with life insurance policies that you might be approved for. If you find a provider that fits your needs, you can click through to that company and finish the application with them. Policygenius makes money based on redirecting you to a provider. Depending on the provider you choose, you may or may not have to do a medical exam, and the degree of information you have to provide will also vary. Read more in our Policygenius review.


As you get older and your lifestyle, financial situation, and health changes, the amount of life insurance coverage you need will change, too. Ladder is an online life insurance provider that realizes this. As your wealth grows over time, you may not need as much life insurance. For example, if you have $1 million in a taxable investment account, you can probably get by with at least $1 million less in life insurance coverage.

You may not have $1 million in an investment account right now. Still, if you’ve followed our other advice about investing, you know that starting early and taking advantage of the power of compounding can help you get there in shockingly short order. Imagine you’re pursuing FI/RE, and you have an aggressive savings rate, putting you at $1 million in just ten years. Suddenly, a 20-year term life insurance policy seems a bit overkill. So what’s great about Ladder is that you can modify your coverage levels at any time, without paying a fee or going through new applications or other frustrating experiences.

Ladder offers their life insurance policies through Fidelity Security Life Insurance Company. I mention that because their ratings are phenomenal with both A.M. Best and the Better Business Bureau. Read our full review of Ladder to learn more.

Health IQ

Health IQ is a bit different when it comes to life insurance companies. They’re an online broker that rewards you for healthy lifestyle choices. Meaning, you can get a lower premium if you have regular, healthy behaviors. Health IQ partners with more than 30 different life insurance providers to get healthy people to lower premiums through algorithms based on science.

For example, if you’re a vegetarian or have a low-carb diet and run regularly, you’d be rewarded with a lower premium since you’re proactively managing any pre-existing conditions. The application process includes an online quiz, which determines your eligibility, followed by an at-home medical examination. After that, you’ll have to do a few more steps before your policy is approved. This includes things like a quiz on health literacy and proving your healthy lifestyle before you finalize a policy. While these seem like extra steps, if you’re truly healthy and active, it might be worth the extra time and effort to save money on your premiums. See our full Health IQ review for more.


LeapLife is a bit different from others on this list, where they may be the right choice if you aren’t super healthy or have an existing health condition. For instance, someone who is overweight and not as active might benefit from using Leaplife.

Like Heath IQ, Leaplife partners with about 15 different life insurance providers to help you get an instant decision on a policy without having to do a medical exam. You can also talk with a life insurance agent to help guide you through the application process and help you find a policy that suits your needs. Since Leaplife is unique, make sure you read our review to learn more about how they operate and if they’d be a fit for you.


Purchasing life insurance does make you consider your mortality, but it’s always better to plan for the worst than have no plan at all. By considering what would happen to your family and loved ones, if you died today, you also determine your worth (which is usually a lot more than you think it is). From there, you can start covering what needs to be covered if you die.

So, do you need a million-dollar life insurance policy?

Related: Policygenius Review
That’s up for you to decide. Use an online life insurance calculator to determine what kind of coverage or policy is best for you. If that policy is a million-dollar life insurance policy, that’s great. If it’s $500k, that’s also great. The coverage amount matters only to where it needs to take care of your family when you’re gone. If it does that, you’ve done your job.

Frequently Asked Questions

Term life insurance is the simplest and most affordable coverage. You simply pay for the coverage when you need it until your kids are grown up, or your mortgage is paid. One option is to use a life insurance marketplace like Policygenius. Their platform will allow you to compare rates from several companies. Long-term policies will cost more money, as explained above. However, it lets you use your current age to your advantage so you can lock in lower rates for a longer period. Shorter-term policies will cost less per month, but once the term expires, you might want to renew, and the rates may be higher due to your age. Consider certain factors when choosing the term length for your million dollar life insurance policy: If you have a child or are planning on having one, it’s good to purchase a policy that can cover the time your child or children will depend financially on you (20-30 years). If you are a new homeowner, you must consider your mortgage (typically 30 years). You must also consider your term length eligibility; You will probably not be eligible for a 30-year policy if you’re 65. Regardless of what term length you choose, it’s all about balance. Contact an expert (such as Bestow Life Insurance, which only deals in term life insurance) to learn more about term length and what you should choose to best benefit your family.

Choosing your insurer is just as important as choosing your term length or policy scope. Your million-dollar life insurance policy is to protect your family if the worst happens. You need to choose a company you know will be in business for the entire duration of your policy. The first thing you should do is check out the company’s ratings. Life insurance policies receive ratings from independent agencies based on how likely they are to pay out a claim if you died. They’re also rated by individuals who use their services. For example, Leap Life has five stars on Trustpilot from users rating them directly. The second thing you should do is analyze how long the company has been in business. A shorter life for the business doesn’t mean it’s worse, but it does mean that they’ve been in business longer and might have more experience. Finally, consider the process the company requires to sign up for life insurance. Online applications are becoming increasingly common, so a business that requires you to come into a brick-and-mortar shop to sign up might not be ideal in an increasingly technological world. The online application will ask about income, family structure, health, and everything else mentioned above. You can get accurate pricing and results from the comfort of your own home. As a point of reference, Ladder Health has a super easy online application. It’ll take you through the various aspects of your life to determine what your typical life insurance rates will be if you purchase from them. Then, you can establish a baseline to compare other rates.

Source: Google | Insurance News

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