The answer to this question depends on a handful of factors, but it’s probably going to be less than you think. Providing your loved ones with half a million dollars in life insurance benefits is a more achievable goal than many people realize — so let’s take a look at what a $500,000 term life insurance policy might cost you.
The quickest way to find out what it would cost to purchase a $500,000 term life insurance policy is to get a free online life insurance quote.
Now let’s take a look at why you might want a $500,000 term life insurance policy and whether that is the right amount of life insurance coverage for you. I’ll also explain a few factors that might affect your monthly rate, no matter how much coverage you end up getting.
Who really needs a $500,000 life insurance policy?
Imagine being able to leave your loved ones half a million dollars in life insurance benefits. It sounds great, but that doesn’t necessarily mean a $500,000 life insurance policy is right for you.
Life insurance is designed to help protect your loved ones financially after your death. If you are your family’s primary breadwinner, for example, a life insurance policy can help your family adjust to r the loss of your income. If you are your family’s primary homemaker and caregiver, a life insurance policy can help absorb the cost of child care.
Life insurance can also help your loved ones:
- Cover funeral costs
- Make mortgage payments on a family home
- Pay cosigned debts, like student loans
- Fund your children’s college education
When I asked financial writer Tanja Hester why she and her husband took out their life insurance policies, she said that if her husband passed away, “I wouldn’t want to have to think about what stuff costs.”
That in itself should be a good reason to take out a life insurance policy.
But how much life insurance do you need? The standard rule of thumb is to take out a policy of between 5 and 10 times your annual salary. This means that if you’re earning $50,000 per year, you might want a life insurance policy of between $250,000 and $500,000 — so yes, half a million dollars in life insurance might be right for you.
It’s worth asking yourself how many expenses your loved ones would have to pay in the event of your untimely death, from car payments to debt payments to the day-to-day cost of living. That’ll help you decide whether to take out a policy that’s closer to 5 times your annual salary or whether you want to go all the way up to 10 times your salary.
However, don’t make the mistake of assuming that life insurance coverage should be solely based on your current income — and don’t assume that a partner who provides a caregiving role also doesn’t need life insurance. This type of thinking has helped create a life insurance gender gap that can hurt families financially in the long run.
Use an online life insurance calculator, which can often give you a more educated estimate of how much life insurance coverage you might need. Enter some basic information about your life, including income, debts, and family size, and the calculator will provide a recommended coverage amount.
You won’t know until you do the math — or consult a calculator.
The price of a $500,000 term life insurance policy
It may surprise you how affordable $500,000 in term life insurance coverage can be. A 35-year-old woman in excellent health could purchase a 20-year, $500,000 policy starting at less than $20 per month. Not a bad price for a significant amount of peace of mind. And, she gets to lock in that price for the next 20 years.
And remember, pricing for coverage is affordable the younger and healthier you are. That’s why, if you know you need coverage, you’ll want to lock in your lower rate now.
The bottom line: Your age and health, the amount of coverage, and the length of your policy will all impact how much you pay for coverage each month. The following are sample quotes for a $500,000 Haven Term policy, issued by MassMutual, for people in excellent health.
|30-year term life insurance rates|
|20-year term life insurance rates|
|10-year term life insurance rates|
|Source: Haven Life|
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Factors that impact the price of a $500,000 policy
The price you pay for term life insurance is affected by several different factors, some of which you can’t control (women generally pay less than men), and some of which you can. Here’s a quick overview of the three biggest factors that will impact your life insurance premium rates: age, health, and term length.
The older you are, the more your life insurance policy will cost you. This is why it’s smart to take out a life insurance policy when you’re young — a lot of people get their life insurance in their 30s, but some people might even want to consider taking out life insurance in their 20s.
Life insurance is also less expensive if you’re healthy. Many term life insurance policies are medically underwritten and require a medical exam — but don’t worry, with Haven Life, this kind of exam generally takes less than 30 minutes and can be done at a time and location of your choosing.
Historically, most medically underwritten policies require a medical exam. However, thanks to recent underwriting innovation in the life insurance industry, it may not be required for qualified applicants to take a medical exam. Haven Life offers the InstantTerm process in which some qualified applicants ages 18–59 seeking a $1 million death benefit or less might meet the criteria that allows them to finalize coverage without a medical exam, based on the information they provided during the application process.
You can complete an application to find out if you qualify to skip the exam. (Keep in mind that it’s always very important to be honest in the application process. The issuance of the policy or payment of benefits may depend upon the answers given in the application and their truthfulness.)
When you take out a life insurance policy, you have the option of purchasing term life insurance or permanent life insurance. Term life insurance is designed to provide coverage over a specific period of time — often 10, 15, 20 or 30 years If you die during the term of coverage, a death benefit is paid to your beneficiaries. Permanent life insurance is designed to provide permanent coverage — that is, coverage over your whole life, and in addition to the death benefit, also includes a cash value feature that accumulates over time.
In general, the longer your life insurance policy lasts, the more you’ll pay in premiums. A 30-year term life insurance policy will be more expensive than a 20-year term policy. A permanent life insurance policy can be between 5 and 20 times more expensive than a term life insurance policy.
Does this mean you should get a 10-year term life policy instead of a 20 or 30-year policy and save yourself some cash? Not really. When you’re deciding which term length is right for you, ask yourself how long your dependents and beneficiaries might literally depend on your income. Then pick a life insurance policy to match that length of time.
If you have a spouse and young children, a 20 or 30-year policy might be a good idea. Your life insurance coverage will last until your children are in their early adulthood — and if you die unexpectedly, your policy can cover everything from mortgage payments on the family home to college tuition payments. If you’re a single person with a few debts that you expect to pay off in the next ten years, a 10-year policy might be a smart option.
Buy the coverage that is the best fit for you and your loved ones
So — now that you know who might benefit from a $500,000 life insurance policy, how to determine whether this coverage is right for you and how various factors might affect your life insurance premium costs, it’s time to estimate your rate.
And if you do end up buying a $500,000 term life insurance policy, you might discover that your coverage is much more affordable than you anticipated.
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Nicole Dieker is a full-time freelance writer. Her work regularly appears on Bankrate, Lifehacker, The Write Life and numerous other sites. She is the author of Frugal and the Beast: And Other Financial Fairy Tales. Opinions are those of the author or the person interviewed.