A million dollars sounds like a lot of money to most of us. That said, million dollar life insurance policies aren’t just for people with glitzy sports cars and sprawling estates.

Life insurance is there to help the people you leave behind carry on financially once you’re gone – and that can take a million dollars, in some cases. Wondering if that kind of coverage is right for you and your family? And how much is a million dollar life insurance policy, anyway? Here’s what to know.

Table of contents

• Can anyone get a million dollar life insurance policy?
• When does a million dollar policy make sense?
• How much does a $1 million life insurance policy cost?
• An invaluable yet affordable investment

To buy a large policy, you’ll need to provide financial justification to your insurance company. Life insurance is about replacing wealth, not increasing it, so companies have a responsibility to make sure you’re buying an appropriate amount.

There are a few factors that influence how much coverage you can buy:

• Your income. Insurers want to see that you’re buying a reasonable amount based on how much you earn (or your partner earns, if you’re a stay-at-home parent). You can generally qualify for up to 20-30 times your income in coverage.
• Your age. Typically, the younger you are, the more life insurance you can qualify for. Life insurance also gets more expensive as you get older, which is why it makes sense to lock in coverage sooner rather than later.
• Your health. If you’re in good health, you can typically qualify for policies that offer higher coverage limits. No exam insurance is a good option if you have health concerns, but coverage amounts tend to be a little lower.

A million dollars may sound like a lot, but as long as you’re employed and you meet age and health requirements, it’s very possible to qualify for that amount of coverage. Based on industry income guidelines, an income of $60,000 or $70,000 would qualify you for a million-dollar policy with most insurers. The question is, should you buy that much?

There’s no magic number, but one rule of thumb is to purchase seven to 10 times your current income. If you’re one of the 9% of Americans who earn at least $100,000 per year, you could need a $1 million policy.

As you crunch the numbers, think about how much you need to cover current and future expenses if you weren’t there to provide for your family. These can include:

• Day-to-day expenses
• Mortgage or rent payments
• Caring for dependent children
• Future college or education expenses
• Credit card or other similar debt
• Student loan debt
• Final expenses

Everyone’s situation is different, but a million-dollar policy can make sense for many families. Consider this example:

Dan and Daisy Brown each make about $60,000 per year. They have three kids and live in a home with an outstanding mortgage of $240,000. If either Dan or Daisy died, the surviving spouse would want to have enough coverage to replace the other’s income and to pay off the mortgage, so the family isn’t forced to move. In addition, Dan and Daisy want to set aside some funds to cover college tuition for all three kids, which could cost up to $140,000 per child for a private four-year college.

Here’s how those expenses add up over 10 years:

• Pay off the mortgage: $240,000
• Replace the lost income: $600,000
• Help cover college tuition: $150,000 ($50,000 per child)
• Cover the funeral: $10,000
• Total coverage amount: $1,000,000

Fidelity Life’s term life calculator can help you find the ideal amount of life insurance for your situation.

For example, as of 2021, a life insurance quote for a $1 million RAPIDecision® Life policy from Fidelity Life for a healthy 30-year-old woman is generally less than $31 per month.

Personal factors that affect the cost of your policy include:

• Your age
• Your overall health and any preexisting conditions
• Anything else that could affect your life expectancy, like high-risk jobs or adventurous hobbies

Term length also affects cost, so think about how long you need coverage. Most insurers offer term lengths of between 10 and 30 years. A longer-term life insurance policy will cost more, but it also lets you use your current age to lock in a lower rate for a longer period of time.

On the other hand, a shorter-term policy costs less per month now. When the term expires, though, you might still need coverage. In that case, you’d need to buy a new policy or renew your current one – resulting in much higher rates either way.

At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.