Usually, the premium charged for a term insurance plan remains the same throughout the policy's tenure. This is one of the reasons why it is suggested to buy term insurance at a younger age when your premium amount is lower and remains the same for the complete tenure of the policy.
Term Insurance Calculator
Term Insurance is a type of life insurance policy that provides financial coverage for a specific period. Unlike other life insurance policies, term insurance does not accumulate cash value over time. It is designed to offer pure protection and financial security to the insured's dependents in the event of their premature death.
To help individuals make informed decisions regarding their term insurance plans, insurance companies have introduced a valuable tool known as a term insurance calculator.
What is Term Insurance Calculator?
Once you know the importance of an insurance cover, pops up the next question: How much Insurance cover do you need?
An online Term Insurance Premium calculator helps in doing just that! It helps us calculate the ideal coverage amount that we need, the amount that can help our dependents lead a normal life, taking care of all liabilities and finances, in case of our unfortunate death.
How does a Term Plan Calculator Work?
A Term Plan Calculator requires you to input your date of birth and annual income. It factors in inflation, expenses and other factors to arrive at a suggested coverage.
You also get a complete illustration of how many years your Sum Assured will support your family with year wise figures of average expenses, average return on the amount if invested and the balance left every year.
What are the Benefits of a Term Plan Calculator?
A Term Insurance Calculator is necessary for well-researched financial planning that includes Term Insurance as an integral component.
Here are the significant benefits of using a Term Plan Calculator:
1. Helps in choosing the right policy and cover
The basic and the most prominent advantage of a Term Plan Calculator is that you can determine an indicative figure of your Sum Assured requirements and accordingly check the premium for the same. For these details, you can even check and compare the premiums from different insurance providers or different plans for a specific sum assured. Finally, you can select the best-suited plan depending on your requirements and budget.
2. Helps in better decision-making
Having a term plan premium calculator at your fingertips means you can better analyse your available choices and requirements before arriving at the final decision. You can input the various parameters like tenure, cover, multiple features, etc. and decide on an optimum policy after certain trials and analysis. You can even factor in the small premium of various Add-Ons and design your policy per your preferences. Check how the premium changes for small changes in the input factors and vice versa. Try different combinations and simulations before you arrive at a final decision.
3. Policy Customization:
With a term plan calculator, individuals can customize their policy based on their needs. By adjusting the coverage amount and policy term in the calculator, they can see how it affects the premium. This flexibility helps individuals find a policy that aligns with their financial goals and provides adequate protection for their loved ones.
4. Saves your time and effort
Different policies across insurance providers come with various features, benefits, terms, and conditions. Reading through them, comparing, and getting in touch with customer service or agents to understand the premium and other things can be a highly tedious and complex task. An online term insurance premium calculator takes responsibility for all that computing so you can sit back, relax, yet be sure of a sound financial decision. Just input the correct details needed for the computation.
What are the Factors that can Affect a Term Insurance Premium?
When you buy a term insurance plan; your term plan premium is calculated based on several demographic and lifestyle factors like age, gender, present or past medical ailments, habits like smoking or drinking, hereditary diseases, and several other factors.
Here are the most common 8 factors that affect a Term Insurance premium.
Age is one of the primary factors that affect your Term Insurance premium. It's an accepted fact that the younger we are, the lesser the risk of developing any critical medical condition that might result in any unfortunate event. This risk increases with age; hence, the insurance provider's financial risk also does, directly affecting the premium.
The Term Insurance Premium directly depends on the period and increases with the increasing term, considering the older and the riskier years of life.
Medical History is also one of the significant factors affecting Health Insurance Premiums since a higher risk to life can mean higher chances of claims to the company. The family medical history is also analysed since there are many diseases like stroke, diabetes, and cancer that can be passed down to the next generation.
Current Health Condition
Term Insurance usually involves a medical check-up before you can buy the policy. This is done to check if the prospective policyholder does not suffer from any ailment like hypertension, diabetes, or any health condition that poses a life risk and thus increases the policy's premium.
Your premium is also affected by your profession. People in risky occupations, like soldiers, pilots, and people working in the mining industry, directly exposed to chemicals or other hazardous activities are more exposed to risk and thus charged higher premiums.
A skewed BMI index can directly mean that you are at a health risk, increasing your premium.
A non-smoker who also doesn't consume alcohol has a lower premium than one who does. Also, if you are inclined towards adventure activities like scuba diving, skydiving, etc., your premium would be higher since these activities put life at risk.
FAQs About Term Insurance Premium Calculator
Riders provide additional benefits and can be added to the base policy for a nominal premium. They increase the total premium, but the change is minimal compared to the total premium amount.
Here are a few pointers that can help you optimise your term plan, i.e., maximum benefits with minimum premium:
- Plan at an early stage. The younger you are, the lesser the premium.
- Choose a longer tenure. Since it spreads the payment over a more extended period, the premium reduces.
- Maintain a healthy lifestyle. Suppose you compare the premiums for a person with harmful habits like smoking, alcohol consumption etc., against someone who maintains a healthy lifestyle. In that case, you will notice that the difference is quite significant.
- Try to pay your premium annually rather than breaking it into half-yearly, quarterly, or monthly, increasing the premium.
In most cases, term insurance policies do not allow for changes in the sum assured during the policy term. However, it is advisable to check with your insurance provider, as some policies may offer limited flexibility in this regard.
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- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.