A one million dollar term life insurance policy may sound expensive for some. Do you need this much coverage? And if so, can you aﬀord it?
Let’s break down what a one million dollar term life insurance policy can cover and help illustrate how such a policy might fit into your life.
A term life insurance policy’s death benefits payout can generally be used to help provide your beneficiaries with financial protection that can be used for a variety of needs. Four specific examples include:
So how can a one million dollar term life insurance policy help with these four common financial considerations?
If you were to die unexpectedly, the loss of your income could significantly impact your family’s way of life. When deciding on the amount of life insurance coverage you want, you may want to consider the total salary that you could expect to earn before retirement.
According to the Bureau of Labor Statistics, the median U.S. income reached $44,000 in 2017.1 An individual making $44,000 per year might consider buying a 20-year term life insurance policy with $880,000 in coverage to help replace 20 years of their salary in the event of their death.
If you have a mortgage and you were to die unexpectedly, what would happen to your house? Would your spouse be able to aﬀord the mortgage payments on their own? Would your family be forced to move?
The national average mortgage debt is about $202,000, not including property tax, HOA, or other fees.2 Someone considering a term life insurance might consider buying a policy that equals the number of years and balance left on their mortgage.
Saving for education costs
If you’re saving money to send a child to college and you were to pass away before building up a suﬀicient fund, your child may have a hard time aﬀording an education on their own. For this reason, term life insurance can often be used to add some additional financial protection.
The average in-state public college tuition, fees, room & board is approaching $21,000 per year for the 2017-2018 school year, which translates to $83,000 for a four-year degree (excluding inflation).3 Out-of-state and private college tuition, fees, room & board can be much more expensive.
If higher education for your children is important to you, you may want to consider a term length that lasts through your youngest child graduating from college and a coverage amount equal to four-year’s of tuition, books, and fees.
Final expenses and medical bills
Your final expenses can present a financial burden on your loved ones. The financial responsibility of providing a proper funeral can unfortunately come at a time of considerable grief.
The average funeral costs anywhere between $7,000 and $10,000.4 The costs of your final medical care — including expenses for ambulance services, hospital stays and other health care services — can add an additional financial obligation.
Calculating a life insurance coverage amount
If an individual considered the average costs listed above as they calculate their term life insurance coverage needs, they may decide that one million dollars is a coverage amount that works for their needs. Each individual’s needs are unique, however, so it’s important to take a full account of your financial situation and the anticipated financial needs of your beneficiaries when you shop for term life insurance coverage.
Contact an AIG-appointed life insurance agent at 800-390-3019 to learn more about your term life insurance coverage options and to find the policy and coverage amount that’s right for you.
1Bureau of Labor Statistics, U.S. Department of Labor, April 2018
2How Much Americans Owe on Their Mortgages, Experian, January, 2018
3College Board, Annual Survey of Colleges; NCES, IPEDS Fall Enrollment data 2017-2018
4How Much Does an Average Funeral Cost, Parting, September, 2017
Agency services provided by AIG Direct Insurance Services, Inc. ("AIG Direct"), CA license # 0B57619 and AR license # 0100105378, a subsidiary of American General Life Insurance Company ("AGL"), Houston, TX and an affiliate of The United States Life Insurance Company in the City of New York ("US Life"), New York, NY, all members of American International Group ("AIG").
Policies issued by: American General Life Insurance Company (AGL), Houston, TX. Policy Form Numbers ICC16-16901, 16901, ICC16-16900 and 16900 except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life), Policy Form Numbers 16901N and 16900N. Issuing companies AGL and US Life are responsible for financial obligations of insurance products and are members of American International Group, Inc. (AIG). Products may not be available in all states and product features including rates may vary by state. All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer and/or insurance agency selling the policy, nor by any of their affiliates, and none of them makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company. © 2018. All rights reserved.