Everything you need to know about Term Insurance Calculator
One of the cheapest ways to provide financial security to your family after your demise is to buy a term insurance policy. The ability to get a high life cover and other useful features like multiple saving options, maturity benefits, riders, etc., at an affordable premium make term plans more attractive than any other insurance product. In addition, with a term insurance calculator, it is now easier to know the exact amount that you need to pay so your family enjoys a comfortable lifestyle even in your absence and how much you can afford it.
Sanjay, a 25-year-old, has completed his Master’s degree and just joined an IT MNC with a monthly salary of Rs. 45,000. He is living with his parents now but wants to buy a flat in the next five years on loan. Sanjay’s parents are not working anymore and depend on his salary to manage the household expenses. At the age of 28, he intends to marry and start a family. With these being his immediate plans, he is looking to buy a term insurance policy to secure his family members’ financial commitments in his absence.
Sanjay contacts his CA friend for advice, who suggests he use a term plan calculator to calculate the coverage value he will need in the future. Likewise, he input all the details of his current expenses along with the required funds to achieve his goals of home, parent’s health, etc., in the calculator, which gave him a clear picture of his financial worth, the right insurance coverage amount, and the premium payable towards a term policy. Sanjay chose a term insurance plan based on the calculator results and was finally satisfied that his finances will be handled properly even if he is not around.
Why a Term Insurance Calculator?
A term insurance calculator is just a simple online calculator that calculates the insurance amount required to protect a person’s family and the premium amount payable for availing of a specific term insurance policy. These results are based on the input provided by an individual, such as age, expenses, future goals, health condition, etc.
Using a term life insurance calculator before buying a plan is very necessary. It helps you understand your financial status, make adjustments if required, and provides the available policy options that fit your budget.
4 Common Factors that determine insurance policy coverage
If you are using a term insurance premium calculator for the first time, knowing about the parameters that calculate the policy premium is required and explained below in detail.
Age
Age plays a vital role in calculating the premium of a term policy, and it is one important field that is common in a term plan premium calculator. Since a person’s age is directly proportional to the premium amount, the coverage of the term plan will increase or decrease. The younger you are, you tend to have fewer health complications, reflecting lower premiums. As the age of a person increases, the premium also increases, in addition, you are needed to undergo medical tests as well. It is why financial advisors always advise buying a term policy before attaining the age of 30 years to lock in low premiums.
Sum Assured
In case of an unfortunate event like death, disability, or illness of the insured, the benefit amount paid by the term plan is helpful to their family members to handle the financial vacuum created by the policyholder’s demise. Therefore, it is the prime reason to buy a term policy as this payout will help them close any loans and settle the liabilities on time, without putting too much burden. On the other hand, if you avail of a policy with less coverage, there is a very high chance of not covering the expenses adding extra strain on your dependents. Therefore, a term plan calculator shall help you deduce the right coverage amount in advance based on which you can plan accordingly.
The everyday expenses that one needs to keep in mind while calculating your worth for choosing the sum assured are Loans, Spouse healthcare, Parents’ healthcare, Children’s education and marriage, Spouse retirement, and Daily expenses.
Riders
Riders are add-on covers that extend the term plan’s protection towards specific emergencies in life such as accidents, illness, disability, etc. Though the riders come at an extra premium, opting for one rather than investing in a new insurance policy is a better option. The commonly chosen term riders are accidental death rider, a permanent and partial disability rider, critical illness rider, waiver of premium, income benefit rider, accelerated death benefit rider, etc.
Medical History
Are you a smoker/tobacco user? Do you have any pre-existing illnesses? Do you suffer from any lifestyle diseases? These are some of the important questions you need to answer while using the term insurance calculator and in the application form while applying for a term plan. Apart from this, the applicant must also undergo a medical test. All these are done by the insurer to know if you possess any health complications because the premium of the policy increases in case you carry risks. Therefore, it is always best to declare your health condition in advance to the insurer instead of concealing any facts to save a few hundred rupees.
Term insurance Calculator Benefits
You may wonder why a simple term insurance calculator is emphasized so much. So here are its advantages:
- It gives a real-time estimate of the coverage that your life requires after considering the expenses, savings, and other goals in life.
- It helps you plan on the yearly or monthly premium that needs to be paid for a specific term policy.
- It lists the various policies that are under your budget and suit your lifestyle.
- It replaces the need for a financial advisor to calculate your net worth and guides in budgeting, giving a clear picture of your finances.
- Finally, it is free of cost to use.
Therefore, use a term insurance calculator to evaluate how much actual insurance coverage amount you require and fits into your pocket, such that you opt for the right term insurance plan for a better future for you and your family.
