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How Much does a $5 Million Dollar Life Insurance Policy Cost?

You’ve worked hard and invested wisely. You’ve set aside a sizable nest egg for retirement. Now you’re wondering about life insurance. A life insurance policy can serve as a tax shelter for wealthy or high-income people who want to pass their assets onto their heirs. This way, your heirs get a nice lump sum and don’t have to worry about taxes. You’ve thought about it carefully and decided you need a $5 million dollar life insurance policy. How much will that cost?

The short answer is that it depends on the type of life insurance policy. $5-million life insurance can cost:

And below are the details of these policies for $5-million coverage.

How Much does a $5 Million Term Life Insurance Policy Cost?

We decided to find out. Here are the six cheapest quotes we could find after we pulled quotes from many top companies. 

These quotes are for a 30-year old male in good health, living in San Francisco. (Clicking on the links if you want to read our full review of these companies)

20-year term

CompanyDeath benefitAnnual Premium
Penn Mutual $5 million$2,940
Symetra Life$5 million$2,954
Principal National Life$5 million$2.970
AXA Equitable Life$5 million$2,975
Zurich American$5 million$2,990
Banner Life$5 million$2,996

30-year term 

Symetra$5 million$4,898
Principal National$5 million$4,995
Banner Life$5 million$4,997
Penn Mutual$5 million$5,020
AG—American General$5 million$5,043
Pacific Life$5 million$5,059

Term life insurance is generally very affordable. However, if you’re looking for a $5 million dollar policy for the purpose of passing an inheritance onto your children, you know that a 20 or even 30 year term expires at the end of the term. If you die after the term is over, your heirs won’t get anything. You could renew, but since you’ll be a good bit older, the premiums will be more expensive. If all you need is life insurance, term is a good bet. 

>>MORE: How Much does A $10 Million Life Insurance Policy Cost?

How Much does a $5 Million Whole Life Insurance Policy Cost?

CarrierDeath benefitNumber of Premium YearsAnnual PremiumGuaranteed years
Penn Mutual$5 million30 years (or until 60 years old)$57,60091
Mass Mutual$5 million55 years (or until 85 years old)$58,55091
Mass Mutual$5 million35 years (or until 65 years old)$68,20091
Mass Mutual$5 million20 years (or until 50 years old)$78,50091

In the Penn Mutual policy, our customer pays premiums for 30 years. 

With Mass Mutual, there are a few choices. In the first one, the policyholder pays premiums until they are 85 years old. In the second policy, the policyholder pays premiums until they are 65, and in the third illustration, our customer pays premiums for 20 years. 

Whole life insurance lasts your whole life, even if you only pay the premiums for twenty years. It also builds a cash value account, which is a type of savings account. You can draw from this account or take a loan out against it. However, if you take a loan, you’ll have to pay it back with interest. If you don’t pay it back, you might reduce the death benefit. 

You will notice that all of the above are mutual insurance companies, which means policies might earn dividends, which can then be reinvested, used to pay premiums, or taken as cash. 

Any way you look at it, whole life insurance is expensive. The cheapest $5 million whole life insurance policy is from Penn Mutual at $57,600 annual premium for 30 years. Totally, you will have to pay $1,728,000 in premium. Your beneficiaries is guaranteed to receive $5 million death benefit, tax free, when you pass away, which is a 2.9X return on investment, which can appear not too bad.

>>MORE: Is Whole Life Insurance a Good Investment? And Why is Whole Life Insurance Not Worth It?

How Much does a $5 Million Guaranteed Universal Life Insurance Policy Cost?

These are quotes for our 30-year old male. He will pay premiums for 30 years only, from 30 to 60 years old. Heirs receive a guaranteed death benefit of $5 million dollars, as long as the insured passes away before age 100.

CompanyGuaranteed Death benefitAnnual premiumGtd. Years
Penn Mutual$5 million$27,38870
American National$5 million$29,25270
Columbus Life$5 million$29,91490
Nationwide$5 million$31,04770
Prudential$5 million$31,68470

Guaranteed universal life insurance policy will give our customer a guaranteed $5 million dollar death benefit, but unlike a whole life insurance policy, it doesn’t build a cash value account. You can draw from a cash value account or borrow against it. If you already have significant savings and don’t think you’ll need access to a cash value account, a guaranteed universal life insurance policy makes more sense as it still gives your heirs a tax-free death benefit and is significantly cheaper than a whole life policy. 

For similar benefits, guaranteed universal life insurance policy costs less than half of whole life policy, just $27,400 annual premium. For 30 years, you will pay a total of $822,000 in premium. Your beneficiaries will receive a guaranteed death benefit of $5,000,000 whenever you pass away, which yield 6.1X return on the investment. This can be a great investment if you can afford it.

>>MORE: Compare Whole Life Insurance with Guaranteed Universal Life Insurance

How Much does a $5 Million Variable Universal Insurance Policy Cost?

These are for our 30-year old customer, who will pay premiums for 30 years. 

CarrierInitial Death benefitInitial annual premiumGtd. years
Prudential $5 million$26,32270
Securian$5 million$30,04970
AG—American General$5 million$32,037101
Nationwide$5 million$33,00870

Variable Universal Life insurance is a good option for a lot of people because it maximizes the cash value account. With this cash value account, you can withdraw from the policy and use it to supplement your retirement income. 

For a $5 million death benefit, variable universal life insurance policy is even a greater option since it offers both guaranteed death benefit and a cash value account that you can withdraw if you need too. However, if you do withdraw from the cash value account and don’t pay back, death benefit will decrease accordingly. The VULone product from Prudential costs a bit cheaper than the guaranteed universal life insurance, $26,322 a year vs. $27,388.

With a Variable Universal Life policy, premiums are invested into a variety of investment accounts. You can choose where you want the premiums invested: stocks, bonds, mutual funds, money market accounts, etc. The interest earned on these investments builds the cash value of the account, usually at a faster rate than a whole life policy would. 

Variable Universal life insurance combines a life insurance policy with an investment vehicle. It’s not without its risks, given the investments can suffer a decline. If the investments perform well, both the cash value and the death benefit can grow. 

>>MORE: Understanding How Variable Universal Life Insurance Works

Last Thoughts

If you’re just considering the premiums you’ll need to pay, term insurance is by far the cheapest option. On the other hand, term insurance comes with a deadline, and you won’t be able to leave any money to your heirs when you pass away. Whole life insurance lasts your entire life, and leaves money to your heirs, but is prohibitively expensive. A VUL or GUL policy will cover you for life and you’ll be able to leave some money behind. 

>>Next: How Much does $2 Million Life Insurance Policy Cost?

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