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ToggleWow! A $750k Life Insurance Policy!
This may seem like a lot of life insurance for most folks, but when we really drill down into how much you need, this may not even be enough. And the good news? These policies can be surprisingly affordable, even for those on a budget.
If you’ve watched any TV or gone on social media, you’ve likely seen life insurance ads where the price seems just too good to be true and figured maybe it’s a scam.
The fact of the matter is term life insurance is cheaper than it’s ever been before, especially if you’re young, a non-smoker, and healthy. Since term insurance is temporary and most policyholders outlive their policy, insurance carriers pay far fewer claims for term than they do for permanent insurance like Indexed Universal Life or Whole Life.
But, you may be thinking, why would middle America need a $750,000 life insurance policy? Keep reading, and you’ll learn why you might need it and how little it can actually cost.
$750,000 is a Big Number, Why Would You Buy This Much Life Insurance?
To help you understand why $750,000 in life insurance is not an unusual purchase, let’s do a case study on a hypothetical 30-year-old married male with two children who wants to have enough life insurance to replace his income if he should die unexpectedly.
Case Study: Jason’s Life Insurance Needs
Jason is a 30-year-old married male with two children ages 4 and 6 years old. Jason’s wife, Emily, is currently a stay-at-home mom working on a computer science degree online and does not currently have a steady income. Jason wants enough life insurance that will pay his family’s monthly living expenses for 5 years, pay off the $285,000 mortgage, pay for college for the kids, and provide a lump-sum investment for Emily’s retirement needs.
To ensure he makes the right decision, Jason decides to call an old college buddy, Eric, who’s an independent life insurance broker. Eric recommends they go through a life insurance needs analysis to determine the amount of life insurance it would take to cover every issue that Jason is concerned about.
Using a life insurance needs analysis calculator, Jason and Eric determine the amount of life insurance needed for Jason’s family if he were to die unexpectedly. Here’s a breakdown of what they found:
- Final Expenses: Estimated to be around $15,000 for funeral and burial costs.
- Outstanding Debt: $4,500 in credit card debt and a $285,000 mortgage balance.
- Living Expenses: $3,000 per month for 5 years to cover living expenses.
- Education Costs: Funds to cover college tuition for two children.
- Savings and Investments: $4,500 in savings and $56,000 in his 401(k).
- Existing Insurance: A small Universal Life policy with a death benefit of $100,000.
After entering these details into the calculator, Jason’s total life insurance needs came out to $750,000. This amount would provide his family with the financial security they need in his absence.
The $750k Verdict
And guess what? Yep, $750,000 ought to do it!
This amount will ensure that Jason’s family can maintain their standard of living, cover educational expenses, and provide for Emily’s retirement needs.
How Much Does It Cost for a $750k Life Insurance Policy?
Although Jason wasn’t shocked when he saw the amount of life insurance it would take to financially protect his surviving loved ones, he was somewhat concerned if he could afford it.
As we mentioned at the beginning of this article, term life insurance is an outright bargain, especially if you are like Jason who is young, in very good health, and doesn’t use tobacco products.
Here are the quotes for a $750,000 life insurance policy with 10, 20, or 30-year term:
Age of Applicant | 10-Year Term | 20-Year Term | 30-Year Term |
---|---|---|---|
25 | $19.24 | $25.99 | $40.97 |
30 | $20.24 | $26.52 | $44.05 |
35 | $21.24 | $28.61 | $52.04 |
40 | $25.55 | $40.60 | $73.45 |
45 | $38.92 | $68.23 | $116.14 |
50 | $59.38 | $104.73 | $189.26 |
When reviewing the rate chart for the various term periods, it’s clear that the longer the policy is guaranteed for, the more it costs in terms of premium dollars. The cost also varies by face amount.
If you’re thinking about what happens when your term insurance policy is about to expire, you do have options:
- Renew Your Term Policy: Most insurance companies will allow you to renew your term policy on an annual basis with a new premium each year based on your attained age.
- Term Conversion Option: Many carriers include a term conversion option in their term policy, allowing you to convert some or all of your term insurance into a permanent insurance policy like whole life or universal life. Although your premium will be higher, the rate class will remain the same as when you purchased the term policy.
- Purchase a Universal Life Policy: You can let your policy expire and purchase a universal life policy with a lower face amount but lifetime coverage. This new UL policy will earn cash value that you could withdraw in your retirement years.
You can get a better idea of policy costs by using the life insurance quoter on the side of this page.
Frequently Asked Questions
Do I have to have a medical exam for a $750k policy?
Actually, you do not have to have a medical exam. Many life insurance companies today will write policies up to a $3 million without requiring a medical exam or blood/urine tests.
Is a life insurance needs analysis free?
Insurance professionals will typically provide this service for free because it benefits the agent and the prospective client. Most people don’t know how to determine their life insurance needs, and this is the best method if your intention is to replace your income when you die.
Do companies offer riders with larger policies?
Absolutely they do. Many consumers want to purchase more than just a death benefit. In fact, living benefits like the accelerated death benefit have become so popular that most companies include the benefit as part of the policy’s core coverage.
How do I determine if $750,000 is enough life insurance for my needs?
To determine if $750,000 is sufficient, you should conduct a life insurance needs analysis, considering factors like your income, debts, future expenses (like college tuition), and your family’s lifestyle. Working with an insurance professional can help you make an informed decision.
What happens if I outlive my $750,000 term policy?
If you outlive your term policy, you have several options. You can renew the policy annually, convert it to a permanent policy, or purchase a new policy with different terms or face amounts, depending on your needs at that time.