A comprehensive guide to use the term insurance calculator

Why is it necessary to use an online term insurance calculator? What makes it an essential instrument while acquiring a term insurance policy? A term insurance calculator is a computerised tool that lets you calculate the premium you will need to pay for the insurance coverage you want. It streamlines the decision-making process and allows you to make a well-informed selection by presenting a clear picture of your possible premium expenditure.

What is a term insurance plan?

term insurance plan is a type of life insurance policy that provides financial coverage to the policyholder’s family in the unfortunate event of his/her death during the policy term. For example, if a person buys a term insurance plan of Rs 1 Crore for 20 years, his/her family will receive the sum assured of Rs 1 crore if the policyholder dies within these 20 years.

Factors that affect the term insurance premium 

1)       Age

The age factor is critical in defining the premium for the term insurance plan. Insurance companies deem the young to be less likely to fall ill or develop a medical condition. So, the premium cost is low for young people. As there is always a correlation between the risk of developing health complications and the amount charged by the insurer, therefore, it is recommended to invest in a term insurance plan at a young age.

2)       Gender

Numerical evidence and actuarial evidence indicate that females have a higher likelihood of outliving males. From an insurer’s perspective, this denotes that women make fewer claims than men and therefore can be charged lower premiums. This discrepancy is due to the different risk profiles associated with gender.

3)       Smoking status

Tobacco use is a leading cause of many diseases and conditions such as heart disease, stroke, and cancer. Owing to this extra risk, the insurance premiums for smokers are higher than those for non-smoker individuals. Some insurance companies have different premium charges depending on whether the policyholder is a smoker or a non-smoker, highlighting the impact of smoking on life expectancy.

4)       Health history

Your past and current medical health history has a direct impact on the cost of the term insurance plan. If you have a history of major diseases such as heart disease, diabetes, or any other terminal illness, the insurer considers you risky. This ends up with a higher premium. Unfortunately, some insurers may even deny the policyholder coverage depending on the extent of the health condition.

5)       Policy term & sum assured

The policy term and sum assured also influence the premium payable under the policy. A longer policy term means the insurer is offering coverage for a longer period and this exposes him/her to the risk of a claim. Therefore, a longer term results in a higher premium. Likewise, when the sum assured is high, the liability of the insurer in the case of a claim is high and therefore the premium is also high. Therefore, while selecting the policy term and the sum assured, it is important to find a balance between the required coverage and one’s ability to pay for the premium.

What is a term insurance calculator?

Term insurance calculator is an online tool which helps one to know the premium required for a particular term insurance plan. It gives an estimated amount of premium based on factors such as your age, gender, whether you smoke or not, the term of the policy as well as the sum assured.

Steps to use a term insurance calculator

Here are five steps to use an online term insurance calculator –

1)       Enter personal details

Include information about yourself such as your age, gender, and your habits including whether or not you smoke.

2)       Choose the sum assured

Determine the sum assured which is the amount of coverage or the lump sum that your family would be entitled to in the event of your demise.

3)       Select the policy term

Select the number of years for which you want the term insurance policy.

4)       Choose riders, if any

Take other optional covers such as critical illness cover, accidental death benefit, etc., if needed.

5)       Calculate premium

All these inputs shall then be entered into the calculator to provide the estimated premium amount.

Benefits of using a term insurance calculator

1)       Saves time and effort

The conventional way of determining insurance premiums may be quite a tedious process. However, an online term insurance calculator saves the trouble. It immediately gives a rough idea of the premium depending on the details that have been entered. This not only saves time but also minimises the effort that would have been used in making manual calculations.

2)       Helps in comparison

In the current market, there are so many term insurance plans to choose from and this can be quite confusing. This has been made easier by an online term insurance calculator where you can compare the premiums of the various plans. It helps you to select a plan that offers enough protection at a reasonable rate of premium.

3)       Promotes informed decision making

Knowing the estimated premium upfront helps in making an informed decision. It allows you to assess if the premium is within your budget, thereby preventing any financial strain in the future. This transparency provided by the term insurance calculator aids in choosing a plan that aligns with both your coverage needs and financial capacity.

4)       Customisable

A crucial benefit of an online term insurance calculator is that it is flexible. You can change the inputs such as the policy term, sum assured, and add-on covers to determine how each factor influences the premium. This flexibility allows you to personalise the term policy as per your particular needs.

5)       Free & easy to use

The online term insurance calculator is free and can be accessed by anyone without the requirement of any kind of technical knowledge. It is easy to use, and the guidelines are easy to follow, making the tool easy to navigate.

Ending note

An online term insurance calculator is a useful and effective tool that may help you purchase a term insurance plan. By offering a comprehensive image of the premium outlay, you may pick a plan that not only meets your coverage needs but also fits within your budget.

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