Keywords: term insurance calculator, life cover
a term life insurance calculator can be described as an efficient financial tool that helps individuals in choosing the most suited life insurance cover for their financial needs and requirements. This online financial tool utilizes personal and financial data that helps to identify a term insurance plan that’s best for them. To fully leverage the online financial tool’s capabilities, it’s vital to comprehend its functioning and the major factors that impact its output. By having a clear idea about these aspects, individuals can use the online tool to make informed decisions about their insurance policies.
On that note, let’s find out the key features and aspects of a term insurance calculator to understand how it can help in financial planning.
How Does a Term Insurance Calculator Work?
An online term insurance calculator is essentially a financial tool that helps users in estimating their term life insurance premiums. It also helps understand how different factors influence the policy coverage amount. To help determine the insurance policy premium, individuals simply enter essential data into the calculator and determine results instantly.
To use the tool, users typically need to enter details like –
- Age
- Annual income
- Marital status
- Gender
- Insurance cover
Once all the details are entered into the calculator, the financial tool weighs the user’s financial capability and overall requirements and then suggests a suitable insurance plan.
Key Factors Influencing The Term Insurance Premium
These factors tend to influence the term insurance policy premium –
- Applicant’s age: Usually, the insurance policy premium for younger applicants is relatively less than the premium for older individuals when are reaching their retirement age. This difference is typically due to the higher level of perceived risk linked with the older applicants. Typically, insurance companies require individuals to submit several documents like – Aadhaar, PAN, and government identity cards to successfully identify their age.
- Desired age of retirement: The standard retirement age is 60 years of age. However, an individual may choose to retire as and when they please, which is either before or after the age of 60. Based on the applicant’s desired age to retire, insurance companies can help tailor their financial coverage to ensure it aligns with the policy buyer’s retirement goals. This ensures a financially secure and comfortable retirement journey for them.
- Annual income: Applicant’s income details are crucial for the calculator to ascertain the most suited coverage amount that could safeguard the financial future of the policyholder’s dependents and help them face monetary hardship in case of the insured’s sudden demise.
- Loan obligations: To help provide an accurate estimate and competitive policy quotes, the tool weighs the user’s outstanding debts. This usually includes their ongoing loans and monthly installments.
- Insurance cover: It represents the recommended coverage based on the user’s age, income, debt obligations, and preferred retirement age. Choosing a comprehensive cover helps ensure that the user gets enhanced financial protection to secure the future of their dependents.
- Existing life cover: The insurance calculator also helps to determine how much extra life cover the user could need to ensure the financial security of their dependents.
In addition, lifestyle factors such as the habit of smoking and excessive alcohol consumption affect the user’s insurance premiums. Those engaging in these bad habits might attract higher premiums for a standard cover due to the increased level of risk factors linked with them. Conversely, female applicants could be considered to be less risky due to the opposite perception and attract favorable premiums and terms for the policy.
Steps to Use An Online Term Insurance Calculator
Individuals can easily use an online term insurance calculator in these simple steps –
Step 1: Go to the official website of your preferred term insurance company
Step 2: Open the Term Insurance Calculator page
Step 3: Enter your details, including name, gender, date of birth, income, and personal habits.
Step 4: Enter the desired sum assured
Step 5: Enter the preferred policy term
The calculator will process the details to fetch an estimate of a suitable term insurance cover and premium plan. On the basis of the results, the user can go ahead with the recommended plan or readjust the variables in the calculator until they avail of a more suitable insurance plan. The fact the term insurance calculator can be used for free, make it easier for individuals to compare different combination of variables and pick a plan that suits their goals the best.
However, before using a term insurance calculator it is suggested to have a clear idea of one’s requirements, especially what would be the best suited contingency amount for their family. This information will help them understand whether an insurance plan is suitable for their specific needs or not. This will help in building a safety net and will help in effective financial planning.
In addition, such a calculator can help users save time by helping them compare multiple combinations of variables within minutes. Similarly, it can help understand how different factors tend to influence their premium and plan their coverage accordingly. Based on this knowledge they can pick a suitable term insurance and simultaneously build a contingency for their needs.
When Should You Get a Term Life Insurance?
It is always recommended to get a term insurance plan at an early age. However, one can readily get a policy anytime between 18-65 years of age. The perks of getting a policy early are many. Since younger individuals are considered to be less likely to develop critical illnesses, suffer from chronic age-related health issues, or raise a claim in the first few years of the policy, they are deemed less risky than older adults. On the other hand, insurance companies always look to offset the risks that come with older applicants by charging a higher premium amount for a basic cover. This means, older applicants are more likely to pay a higher premium for the same cover a younger applicant gets as a nominal amount. This is why it is recommended to get insurance at an early age in life. To understand the difference better, individuals can use the term insurance calculator and determine how age plays a key role in deciding premiums.