If you are, researching, or in the market for a 1 million dollar term life insurance policy, you are in the right place. This article will discuss pricing and financial ratings at major insurers, underwriting issues , including no-exam options, and navigating pre-existing conditions.
Whenever a client asks for a quote for 1 million dollars of term life insurance, my first question is "how did you come up with that number?". The reason I ask is that it's important not to just pick a round number out of thin air.
The fact is that life insurance whether one million dollars or more (or less), is meant to cover specific needs. Therefore, it is important that you assess those needs , and your budget, when deciding on a coverage amount.
I have found that, despite having access to complicated financial planning software, the best way to do a simple needs analysis is to use the acronym L.I.F.E.. That is, loans, income, future plans, and education. The LIFE formula is laid out below.
Adding these numbers together and optionally adding a conservative annual inflation adjustment, will give you a good idea of your "gross" need.
At this point you can subtract any savings and 70% of qualified retirement funds (unfortunately we have to be mindful of taxes). Additionally you can subtract any current, personally owned*,life insurance that will be in-force for a useful period (until an expense expires like college).
* I advise against using employer provided life insurance in this initial calculation, as there is no guarantee that a future employer will be able or willing to provide this benefit.
It is best to think of employer provided life insurance benefits as supplemental. This can be especially helpful if budgetary constraints force you into a less than "fully insured" position.
So, after doing the L.I.F.E. calculation if it turns out you were right all along, you'll want to know "how much for 1 million dollars of term life insurance?'.
The answer can be super easy or super complicated. We will deal with both scenarios. But before we get to the quotes, a quick note on the financial strength of carriers. The Life Insurance Help Desk only offers carriers that are A rated or better. You can learn more about the financial strength ratings of carriers here.
The super easy scenario is for people in good to excellent health. In these cases you simply use the quote tool and you have an answer.
Below is the quote for a 40 year old male in excellent health.
Next The same for a 40 year old female in excellent health.
Okay, so that was the super easy portion of this quote, you can easily choose a competitive carrier and submit your application. However, you only have these options available with an independent agent. Think if your agent only represented a carrier that is not as well priced as these that are listed. Would you know?
* Note that Principal Financial while a little more expensive, will do one million dollar term policies with no exam for qualified applicants.
Now lets discuss if ,like lots of people, you have health history.
Much of this site is dedicated to navigating the life insurance underwriting process with existing medical conditions. The issue is that different carriers have different risk appetites for specific conditions.. So, what is standard plus at one carrier may be table 2/B substandard at another carrier, and there is no way to know this by looking at the quote tool.
What you might not know is that different insurance companies will also treat each case differently.
For example SBLI may have more of an appetite for the risk that Crohn’s disease presents than say Protective. In this case the underwriting grade will reflect this increased appetite.
So, if your Agent only represented one carrier and you found out later that that you could have gotten a rate 35% or 45% better, how would you feel?
You’d probably be mad either at the agent or yourself or both. So it’s important that your Agent can sell multiple carriers.
In fact a good independent agent will have access to over 50 carriers. This ensures the best chance at a good rate. It also gives you the opportunity to choose a carrier with better financials, or pick a no exam option.
Note that if he doesn’t have access to multiple options, he probably won’t be in a hurry to let you in on this information.
So, I have been droning on about the importance of using an independent Agent and you may think that sounds a bit self serving coming from an independent agent.
You’d be are right, it is. However, it is also the (provable) truth.
As a way to demonstrate the importance of being able to shop different carriers on more than simply price, but also underwriting, we have taken this case study from our life insurance with Crohn's Disease page. It will show why it is in your interest to have as many options as possible available when shopping for life insurance with Crohn's disease or any other impairment.
Gender: Male Age: 53
$1000000 Year Term
Well controlled mild Crohns Diagnosed Age 46
OTC Anti-diarrheal use No Other Health Concerns
This looks like a best case scenario would be either standard or Table 2/B depending on the insurers appetite for a Crohn's risk. Let’s take a look at the rates.
Standard Rates Table 2/B Rates Table 4/D Rates
|CARRIER||MO. PYMT||CARRIER||MO. PYMT||CARRIER||MO. PYMT|
This table which shows only a few of the major life insurance companies available, illustrates the difference in rates. For standard rates american General is only a dollar more expensive than Protective.
On it’s face this seems like a pretty straight forward choice and if underwriting grades between carriers is the same,as we showed earlier, it really can be that simple.
For people who suffer from Crohn's disease or any other serious diagnosis, it gets much more complicated.
Because life insurers manage their appetite for specific risks by being more lenient or more stringent with underwriting grades, you need to know which company will grade you a standard risk and which ons will grade you as table 2-4.
In the case above if your Agent can’t use AIG and sends you to Protective because it's the lowest price, you will be unhappy if you later find out that Protective underwrote the case as table 2/B while AIG may well have gone standard.
This is something you can’t know by simply looking at the lowest price. In this case using an independent agent could save you 39% (the difference between AIG @ standard and Protective @ Table 2).
Over the life of the policy that’s more than $48500 that would be better left in your wallet!
Now that you know the information you will need to receive the best quote possible for a 1 million dollar term policy, it’s time to gather the information and speak to an independent Agent (raising my hand).
We are committed to totally transparent pricing (we’ll even share our computer screen with you if you’d like), and making the application process as painless as possible.
Thank you for using the Life Insurance Help Desk to research one million dollar life insurance policies. Should you have any questions, please do not hesitate to contact us. Call(203) 424-1100 or shoot us an email.
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Jim Tobin is the owner of Life Insurance Help Desk, a Fairfield County, CT. life insurance agency. You can find him on LinkedIn and Facebook. Over the past 10 years, Jim has used his CFP-financial planning designation to help individuals with their life insurance needs. In addition to working with life insurance clients, Jim teaches ESL classes in his spare time. He resides with his beautiful wife Nicole and the 3 cats that rule their lives..
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