Assessing how much financial support your family might need to recover after you’re gone is important. Replacing your salary, paying off your debts and having enough left over to address your family’s future goals adds up quickly — a $2-million life insurance policy might not seem so outlandish when you’re done. The good news is that if you’re healthy and start early, a multimillion-dollar policy can be relatively affordable.
Cost of $2 million life insurance policy
If you’re in good health and start your policy young, a multimillion-dollar policy can cost less than you might think. To give you an idea of costs, we researched quotes for a $2 million policy through PolicyMutual for a healthy 40-year old man. Women’s policies tend to cost less, and you’ll pay higher premiums if you smoke.
| Term length | Monthly rates |
|---|---|
| 10-year term | $43 to $78 |
| 20-year term | $92 to $152 |
| 30-year term | $182 to $234 |
Whole life insurance is more expensive than a term policy, but your whole life policy doesn’t end as a term policy does. Our same healthy 40-year old man could expect to pay $998 to $1748 a month for a $2 million whole life insurance policy.
Factors that affect rates for a $2 million life insurance policy
One of the most influential factors making up your life insurance premium is your age and health, so the younger and healthier you are, the less you’ll pay each month. Life insurance companies also look at your smoking status, gender, occupation and hobbies. Living a riskier life equals a more expensive policy.
Which type of coverage, and the coverage level you choose impacts your rates. The higher the coverage limit, the more you’ll pay. But you might be surprised to learn that doubling your coverage from say $1 million to $2 million doesn’t double your premium, instead you may only see a small percentage increase in your annual costs.
When you might need a $2 million life insurance policy
If you earn over six figures, you might need a $2 million dollar policy. Insurance agents and estate planners recommend six to 10 times your annual salary. Some say to multiply your salary by the number of years you have left before retirement.
For example, someone earning $200,000 annually with a $500,0000 home and two minor children could easily need $2 million in life insurance to replace their income and protect their family.
Consider your other sources of wealth when deciding if you need $2 million in life insurance. Your savings, pension, investments and other sources of income may be sufficient to take care of your financial needs, so a smaller life insurance policy could be enough.
How much coverage you need comes down to these factors
Tally in these factors to calculate how much you might need.
- Your debt. Between your mortgage, car loans and any other credit lines you have, having the cash to pay off your debt can help your family reduce their monthly expenses.
- End-of-life expenses. Your life insurance should include money to cover the cost of your funeral and any medical bills.
- Long-term care. If you’re responsible for covering the care of elderly or sick family members, your benefit should include money to care for them in your absence.
- Tuition. Make sure your children have the money they need to get the education you want for them.
- Estate taxes. Your death benefit isn’t taxable, but it can be used to help pay estate taxes, if your estate exceeds the estate tax threshold, which is $11.7 million in 2021.
- Lifestyle. Life insurance can replace your income to allow your partner and children to maintain their current lifestyle.
- Your business. If you own a business, you may be required to carry some minimum level of life insurance to protect your partners and the business assets. If some of your life insurance proceeds go to your business, be sure to plan for this so your family is still protected.
- Philanthropic interests. If your family is already well-protected with other assets, you could earmark some of the proceeds from your $2 million life insurance policy for charitable donations to support a cause important to you.
How to qualify for $2-million life insurance policy
Whether you qualify for a multimillion-dollar policy depends mostly on your age and your income level.
- Salary. All insurers have a different set of standards, but maximum coverage levels are usually between 10- and 30-times your gross annual salary. That means to qualify for $2 million in coverage, your annual salary should be at least $200,000.
- Age. Whether you qualify for 10- or 30-times your salary depends on your age. Because your coverage is based on your earning potential and financial obligations, starting a policy at a younger age increases your eligibility for a higher coverage policy — and results in lower monthly premiums.
You can get $2 million coverage without a medical exam — but it’s rare
Yes, although few insurers write this much coverage without a medical exam. Brighthouse Financial and Prudential both offer a term policy with $2 million limits with no medical exam, but you’ll need to complete a medical questionnaire that is reviewed by an underwriter. Some insurers write up to $3 million without a medical exam, but you’ll pay more for the convenience factor of avoiding the doctor.
Most policies that don’t require a medical exam, such as guaranteed life insurance, are capped at $10,000 to $25,000 in coverage.
What to watch out for
Even though you qualify for a high level of life insurance, doesn’t mean you need it. Assess your finances and determine exactly how much you need. For example, if you’re single and have no children or anyone to care for in your absence, paying for a multimillion-dollar policy may be unnecessary.
Reassess your coverage needs as your career and family grow. Use a major life event, such as marriage, career change, divorce or the birth of a child as an opportunity to reconsider your life insurance coverage.
How to purchase a $2 million life insurance policy
If you’re ready to buy a $2 million life insurance policy, the first step is researching your options. Insurers are competing for your business, so compare rates to find the best option for your family.
See how the coverage and rates stack up against competitors, you might find that some companies specialize in policies for older people or for people with medical conditions. This means they may be able to offer you lower rates than competitors.
Once you decide on a policy you can complete your online application, answer medical questions and digitally sign your application. If you have to attend a medical exam, your insurer will send you the details. Your insurance company’s underwriters then review your application and records and let you know when you’re approved.
Once you’re approved for your policy, setting up automatic payments can lend additional peace of mind that your life insurance won’t be canceled for non-payment.
Bottom line
If you qualify and your financial situation warrants it, a $2-million life insurance policy can be an affordable way to make sure your family is fully cared for after you’re gone. But the key to keeping your premiums down is to start as early as possible and compare life insurance companies to find the best coverage for you.
