Understanding the cost of life insurance can be crucial to securing your financial future. Have you ever thought about how affordable or expensive a million-dollar policy could be?

Do you consider a term life insurance policy worth a million dollars to be too much?

I am a Certified Financial Advisor and see people underinsured every day.

What should I tell them?

Although a million-dollar policy is the minimum amount of coverage required for a typical middle-class family, it’s still affordable.

It may sound exaggerated, but when you crunch the figures – as we will be doing in a bit – it becomes clear that you might need a policy worth a million dollars.

The good news about term insurance, it’s not as expensive as people think.

The fact that large policies are cheaper per 1,000 than smaller ones makes them even more attractive. The premium for a policy worth $1 million may be only slightly higher than the one for $500,000.

Do you really need a $1,000,000 Term Life Policy?

Let’s see. As a general rule, you should have 10x your annual income in life insurance.

You may not want to spend that much money on your family if you are young.

The new standard for life insurance is $1 million. This applies to the primary breadwinner. Your family could be financially harmed if you have less than $1 million in life insurance.

Add the following to your calculations when calculating how much you need

This is a list that includes all the obligations you might want life insurance to cover in case you die early.

• Your income (and for how many years)

• The Final Costs

• All Debts You Want To Be Repaid

• College education for children is a future obligation

• Other obligations such as business

• The following are some items you can subtract when calculating the amount needed

• Current Life Insurance Policies

• Assets like cash or stock that you can use instead of life insurance

Let’s put these numbers into the life insurance calculator and see if a million dollar policy is needed.

Choose A Million Dollar Insurance Plan

According to Policy Genius the average monthly cost of a 20-year term life insurance policy worth $1 million for a male 35 years old is $53 Your rate may vary depending on the following factors.

The following factors will affect your rate.

• Your Age

• Your Health

• Your Gender

• Your Hobbies

• The coverage amount and policy term

What is the best place to begin?

Online is the best and easiest way to get started. To get the best coverage and rate, I recommend that you have two or three insurance companies compete for your business. Choose your state on the map to instantly compare top-rated life insurance companies.

What factors affect how much you need?

Look at the components that add up quickly to a policy worth over a million dollars.

Income Replacement

Here’s where it can be a little intimidating. Even if your income is modest, it may take close to $1,000,000 to replace your income in order to cover your family’s living expenses.

In the insurance business, it is common knowledge that you should have a policy of life insurance equal to 10-20 times your annual salary. If you earn $50K a year, your policy would cover between $500K to $1 million.

It is possible that even with the low interest rates today, it will not be enough.

If you had a $1,000,000 policy that was invested at 5% annually, your family would be able to live off the interest earned, which is $50,000 per year.

The original $1,000,000 would remain intact for other expenses. With today’s tiny interest rates, it’s impossible to guarantee a return of 5%, and certainly not over 15 or 20 years.

Outstanding Debt

In the US, debt burdens can be particularly heavy on family members. Most life insurance policy holders make sure that they can pay down most of their debts with the policy.

Medical Debt

Medical costs can be a major factor. Even if your health insurance is excellent, you may still have unpaid medical bills after your death. It has to do copayments and deductibles.

Together, these costs can amount to thousands of dollars. The real problem comes when you have a terminal disease.

If you suffer from a long-term illness, for example, you may incur expenses that insurance does not cover. It may be necessary to pay for personal care or even experimental treatments.

You can also find out more about Mortgages

The average mortgage balance in the US is $236,443, according to a data-wpel-link=”external” href=”https://www.experian.com/blogs/ask-experian/how much Americans owe on their mortgages in every state/”>Experian data/a>. According to data, the average mortgage in the US is $236.443. You could use your life insurance to pay that debt off and save your family from having to make a mortgage payment each month.

Personal Debt

Some of the highest rates of interest on personal debt, such as credit card debt, can reach 20%. Be sure to have enough money to pay off this expensive debt.

Future Obligations for Your Family

Here is a list of some major expenses that your family will likely incur either annually or after you die.

College

Tuition prices continue to rise. The Department of Education claims that the average four-year tuition at public colleges has increased by 5% annually, which is far more than inflation. The total cost of $416,560 will be incurred if you have a child in an in-state school, another in an out-of state school and a third at a private college.

• Cost of attending a public college in the state: $20,770 per year (83,080 dollars for four years).

• Cost of attending a public college out-of-state: $36,420 per year (or 145,680 dollars for four years).

• Cost of a private college per year: 46,950 dollars (187,800 dollars for four years).

Transport

Other forms of transport and vehicles also represent a large amount. The average price of a new vehicle continues to rise due to the increasing number of electronic and safety features.

Health Insurance

Take note if your family depends on you for their healthcare. According to investpinnacle.com/ the average family health insurance premium is $22,221. This is a little under $2,000 extra per month. The cost of this will continue to rise and could be needed for many years.

Additional Obligations that You Might Need to Cover

We’ve described the financial obligations that are likely to impact a typical family.
Certain situations may produce obligations which are not immediately apparent.

Business Owners

If you own a business, for example, there could be debts and other financial obligations which will need to paid after your death.

Although no one in the family may be interested or qualified to take over your business, it may be necessary to pay off these obligations in order for the business sale to be possible.

Real Estate Investor

You could also be a real-estate investor.

You may need extra insurance proceeds to either carry your property until it’s sold or to pay down existing debt to create cash flow to generate income.

Even if you have to take care of a parent or other extended family member who is aging, it may be necessary to set aside additional funds.

The proceeds from insurance will cover a wide range of possible expenses.