Let's take the example of a man, father and husband, who earns $80,000 each year and wishes to take care of his family financially. To do this, he requires a minimum 1 million dollar life policy to 1.5 million.
Assuming that 1 million will generate an average of 5% interest per annum, this would equate to a sum of $50,000, the 1.5 Million would net around $75K. As such, there would be no requirement to deplete the principal.
There is an argument however that a figure greater than $1 million will be required because currently it's very difficult to find anywhere which would offer returns of 5%. Perhaps he would need a 2 million to 2.5 million dollar policy.
The monthly premium quotes below are for a male who is in excellent health and is a non-smoker. Do note, however, that a man or woman with a poor health history, smoker, or current medication use can potentially increase the premium.
|Age||1 Million Dollars||2 Million Dollars||3 Million Dollars|
|20 years old||$36.23||$66.94||$99.75|
|30 years old||$37.19||$70.00||$102.38|
|35 years old||$41.80||$78.76||$115.42|
|40 years old||$56.44||$108.76||$160.42|
|45 years old||$107.57||$210.35||$312.73|
|50 years old||$154.00||$302.75||$451.50|
|55 years old||$265.95||$524.25||$782.55|
|60 years old||$429.98||$847.47||$1,271.20|
|65 years old||$903.15||$1,798.65||$2,694.15|
|70 years old||$1,596.88||$3,191.13||$4,785.38|
For an income earner who is on $80,000 to $100,000 per year, the necessary insurance coverage would rise up to around $2,000,000.
Should you take medication for diabetes, high cholesterol, or high or low blood pressure, you can still qualify in most cases. If your cholesterol or hypertension is well controlled, there is a still a reasonable possibility to qualify for the preferred rate classes, which are similar to the rates given in the table above.
With regards to diabetes, providing it’s well controlled and there are no additional medical issues, standard rates are easily obtained. Preferred (best) rates are also obtainable providing the diagnosis is recent with a low a1c, and you are not above the age of 55.
Consider a 20 year term, $2 million policy for $847 monthly premium. There can be no argument that if you can afford the $847 monthly premium, this would make for an excellent investment.
Taking the scenario that you are 60 years of age and you invested in the $2 million 20 year term policy, and you lived for a further 10 years, your investment into the policy over that 10 year period would be just over $101,000. This equates to an internal rate of return at 63% per annum!
Looking at this same scenario from another angle. If you lived to 75, the rate of return would be some 32%, and if you lived to 80, the rate of return would be 20%.
There’s no doubt that this makes for a fantastic investment and there's little chance you could possibly emulate this with any other type of investment vehicle.
If you are wondering "How much does a million dollar life insurance cost?", no matter your age, 30, 40, 50, 60, 70, etc. It is easy to find out typical policy costs by clicking here!