A life insurance calculator is a tool that will help you compute the insurance premium that you would be required to pay to avail a protection cover. The tool uses several factors to compute premium amounts and helps users compare different plans easily.
This ease of use and comparison helps compare plans and understand which factor influences premium the most. However, to make the most of the tool it is advised that you become familiar with what is life insurance calculator’s features and use.
Life Insurance Calculator – A Quick Brief
A life insurance calculator is an online financial tool that can be used for free. The tool is designed to help calculate the estimated premium for life insurance coverage. Typically, an insurance calculator uses factors such as the user’s age, income, medical history, dependents, liabilities, and more to offer a suitable estimate. Besides these factors such as policy name, sum assured, frequency of premium, and additional rider benefits, if any are important for the calculation.
Life Insurance Premium – A Brief Introduction
The insurance premium is the money you pay your insurance provider in exchange for a life protection cover. The amount varies among applicants and is heavily influenced by their risk profile and policy terms. Notably, based on the payment schedule you choose you will have to pay a premium amount monthly, quarterly, annually, half-yearly, or as a one-time lump sum.
Usually, younger applicants are considered to be less risky, so they get lower premiums whereas older adults are asked to pay higher premiums for similar coverage. Similarly, those with a healthy medical record and lifestyle habits will pay less than those with pre-existing conditions and poor lifestyle habits like smoking and drinking. To understand how each of these variables can impact your premium. Such insight will help you develop the necessary strategies to lower the premium burden.
Steps to Use Insurance Calculator
You need to follow these easy steps to compute insurance premiums –
Step 1: Enter crucial details such as age, smoking and drinking habits, and gender.
Step 2: Enter the required life cover and term period
Step 3: The estimated premium will be on the screen
Note that some insurers may factor in other key variables to determine your suitable premium. Also, the final premium may vary from case to case and among insurers. Since the calculator can be used for free and allows multiple adjustments you can readjust the variables several times to identify the suitable combination for your needs.
How to Calculate Life Insurance Premium?
The best way to compute insurance premiums is to use an online calculator on a trusted website. The process is simple and similar to how we use the SIP calculator step up tool. This will help you avail of quick results instantly, offering you time to compare different plans’ scope and liabilities.
When you access an online insurance calculator, all you need to do is enter key details such as age, premium paying frequency, term period, expected sum assured, and other relevant information. Subsequently, the tool will help determine the suitable premium.
This means before you set out to compute your insurance premium you must know your requirements clearly. To begin with, understand your payment capacity, and factor in your financial liabilities which you wish to cover with insurance returns, living expenses, and more importantly the liabilities of your dependents. It is recommended you opt for a cover that would be at least 10-15 times your annual income. This will help your dependents to account for the expenses and replace your income with the money. This will allow you to build a financial safety net for your loved ones and ensure their needs are met even in your absence.
This process will become more effective if you account for factors such as income, expenses, current and future obligations, and the years till retirement. These factors will help understand the financial liabilities and required support in the form of a cover.
What Can Affect Your Premium Rates?
The rate of life insurance premium is actually the sum of money you need to pay to get a life cover. As mentioned several factors influence this rate. Let’s take a quick look to understand how a few factors can influence your premium amount –
Investment earnings
The premiums paid are used to pay off insurance claims. Hence, the insurer may want to confirm your income and earnings from investments to understand your payment capacity and your risk of policy lapse or default.
Rate of mortality
Your age will help determine the rate of mortality for your age group. This will help insurers to assign a risk factor to you and subsequently decide a suitable premium for your desired coverage. If you belong to the younger age groups you would be likely to get a substantial cover for a standard premium. However, if you belong to the older age group you are likely to pay more for the cover than the younger lot of applicants. This is mostly because of the older degree of risks associated with them as insurers believe they have fewer chances of raising a claim early into their policies.
Sum Assured
If you desire a high cover you could be asked to pay a high premium. Check the same on a calculator to understand how the desired coverage can impact your premium rate.
Health and Personal Habits
An unhealthy lifestyle has several perils, and increased premium is definitely one of them. If you have a history of medical conditions and continue to indulge in poor lifestyle habits such as drinking alcohol and smoking you could end up paying a 30-70% higher premium than those with a healthy medical history and lifestyle habits.
These aspects make the insurance calculator a crucial tool for determining the cost of managing coverage. By using the tool you can assess your capabilities and build a suitable financial plan and strategies to meet your protection needs. However, a calculator will only offer you an estimate of the premium amount. To avail of a more accurate number, you can request insurance quotes. These quotes can be obtained free of cost and do not bind you to any obligations.
