Who needs a $500,000 life insurance policy?

While we would never call you average, we thought you might want to know that, according to a Georgetown University study, the average American without a high school diploma earns nearly $1 million in their lifetime. As you would probably guess, those with additional education earn more. All of which is to say that, while a half-million dollars might sound like a lot — and it is — it’s a less imposing figure when considered over the course of your lifetime.

Which brings us to life insurance. When you’re buying life insurance, you need to be mindful of choosing a policy amount that covers more than end-of-life expenses (like burial and a funeral). You also need to consider decades of expenses when reviewing life insurance quotes, if you were to pass away suddenly. These expenses might include things like mortgage payments, childcare, health care costs, and of course, education needs.

But how much does $500,000 worth of insurance coverage cost? And is a $500,000 life insurance policy enough coverage? As we often say, life insurance is one of those things where more isn’t necessarily better. That’s why we’ve put together this guide with tips for determining the coverage amount for you. And if it turns out a $500,000 life insurance policy makes sense, we’ll also let you know how you can buy a policy and what else you might need to consider for your financial protection. Let’s get to it, shall we?

How much life insurance do I need?

Before getting into life insurance rates, it’s worth asking who actually needs a $500,000 policy to cover their financial obligations. A common rule of thumb is to have coverage that’s 5 to 10 times your annual salary. That would suggest that a $500,000 policy could be right for someone who earns between $50,000 and $100,000 a year. The reason for the broad range is that your exact policy needs depend on the age and quantity of your dependents, as well as other factors, like what debts you have and your partner’s income. You will be able to review these factors further with your life insurance provider.

Nonetheless, for many people, the rule of thumb is a useful starting point. If you’re the type who likes your life insurance needs a bit more personalized to you (most people do), you can also use this online life insurance calculator. It’ll estimate your face amount and term insurance length needs based on your family structure and financial situation.

What does a $500,000 life insurance policy cost?

Most things that are worth $500,000 cost $500,000, but that’s not the case with term life insurance. As for what does a $500,000 policy cost, there are two definitive answers to the question: The first is, “It depends, but it’s easy to find out.” And the second is: “a lot less than you probably think.”

The easiest way to get an idea of how much life insurance will cost is to use a free online quote tool. Using a life insurance quote tool you’ll see that a healthy 35-year-old woman can buy 20 years of $500,000 Haven Term life insurance coverage for around $18 per month.

Life insurance rates are affected by several different factors, some of which you can’t control (like your age), and some of which you can. Three key factors that can influence the price of your term life insurance coverage are your age, your health, and the length of the term.

Age

The younger you are, the less you’ll pay for life insurance, which is a strong argument for getting it sooner, rather than later. The rate for a policy goes up as you get older because your age increases and logically, your health, well, decreases. For example, a man in excellent health, looking for a 20-year, $500,000 policy:

• If he’s 35, he’ll pay around $21 a month
• If he’s 45, he’ll pay about $42 a month

Health

The bottom line is… the better your health, the less you pay. Take the example of a 35-year-old woman looking for a 20-year, $500,000 policy:

• With excellent health, she pays around $18 a month
• With average health, she pays approximately $44 per month

Smoking will also negatively impact your life insurance rate. If that same woman smokes:

• With good health, she pays around $61 a month
• With average health, she pays close to $108 a month

Term length

The longer you want coverage for, the more your life insurance quote will be. A 35-year man in excellent health, looking for $500,000 of coverage will pay:

• About $14 a month for a 10-year term
• Approximately $16 a month for a 15-year term
• Around $21 a month for a 20-year term (a popular term length for our mid-thirties to early-forties customers)
• Just over $29 for a 25-year term
• Approximately $35 a month for a 30-year term

So does this mean you should get a 10-year policy instead of a 20-year policy and save yourself some cash? Almost certainly not. The length of your term should be based on the amount of time your dependents will need life insurance coverage for their financial obligations. If you have young children and want to make sure they’re looked after financially if you die unexpectedly, that might mean you’ll need a longer term length than if you just have a few lingering debts that you expect to pay off in the next ten years.

Additionally, this is when the discussion of term versus whole life insurance comes into consideration. Permanent life insurance policies (like whole and universal life insurance) offer coverage that lasts a lifetime as well as a cash value component that can grow over time. However, these permanent life insurance policies can be cost prohibitive compared to term policies.

A 30-year-old woman in excellent health would pay about $25 per month for a 30-year, $500,000 Haven Term policy. A $500,000 whole life insurance policy for that same woman would be about $411 per month [Source: State Farm]. As you can see, the added financial protection can come at a high monthly premium cost. Below you’ll find our term life insurance rate chart.

Quotes for a $500,000 term life insurance policy

How do I buy a $500,000 policy?

As with any insurance coverage, the process of getting a $500,000 term life insurance policy begins with getting a quote and then filling out an application, both of which you can do online with forward-thinking life insurance agencies like Haven Life.

Just know that you will likely pay less for a policy that is medically underwritten, which means that the life insurer is going to look at factors like your lifestyle, health, and medical history to determine eligibility and pricing. For many people, medically underwritten policies are more affordable because pricing is based on your health and other known factors so the life insurer is taking on less risk from the lack of unknowns. For this type of policy, you will usually need to take a medical exam to finalize coverage, but there are some situations where you may qualify for a no medical exam buying experience. Once an application is submitted, you will know whether or not a medical exam is needed. (Please keep in mind that issuance of the policy and payment of its benefits may depend on the truthfulness of answers provided in the application.)

If you need to take a medical exam to finalize your life insurance rate and coverage, it takes about 20 minutes and can be scheduled at a time and place of your choosing. Also, the insurer may offer your temporary life insurance coverage to financially protect you while you wait to complete your exam and get a final decision.

Is my life insurance coverage dependable?

If you’ve spent even a little time shopping for a life insurance product, you know that you have a lot of options when choosing your life insurance company. One way to narrow down those options is by consulting ratings from third-party agencies. These agencies analyze an insurance company’s financial strength, and their ability to fulfill their contractual obligations to pay out a policy — and they do so independently, so you can trust their assessments. Typically, you can find a life insurance company’s ratings on its website; you can also check out life insurance reviews from customers.

Finding the right coverage for you.

Even though $500,000 sounds like a lot of money, you may well find that you need that much. We find that the average life insurance policy that a Haven Life customer purchases is around 20 years and $600,000. The price for a policy will vary according to your individual circumstances, but it’s easy to find out that number, and one of the great things about life insurance is that you don’t get what you pay for – you get more by way of peace of mind.