Some of the most significant components of a term insurance policy that all customers should know about are term duration, premiums, and sum assured. All these factors are influenced by the personal details of the life assured, such as their age, gender, smoking habits, and sometimes even their health conditions.
Knowing how much premium you will be expected to pay for the sum assured you want can be a baffling but essential calculation. Fortunately, you do not have to do it all by yourself. Term insurance calculators are now easily available online. These nifty tools can help you look at the various possibilities with a term plan in relation to your personal details.
What is a Term Insurance Calculator?
Term insurance premium calculators are online tools that allow customers to feed their details and figure out how much premium would they be required to pay for the sum assured they desire. These are available on the websites of various insurance providers, or even third-party insurance plan aggregators. Some insurance providers also provide this tool on their apps.
If you have a plan shortlisted, you can log on to the policy provider’s website, where they may have a calculator for the plan. If you are still in the process of deciding which term plan is the best one for you, you can search for a term insurance calculator online.
To get the premium or sum assured estimates, you will be required to fill in all the necessary details. It may include:
- Personal details such as your name, age or date of birth, gender, smoking habits.
- Premium frequency and payment option
- Policy term
- Death benefit mode
- Rider & benefit options
- Sum assured
You may be asked for more details, such as contact information. The structure of the calculator may differ from one website to another.
Once the calculator receives the input, it will give you an estimate of what your premium amount could be at your desired frequency and sum assured. You can then adjust the parameters to get a lower or higher premium, as per your requirements.
How to Decide Your Sum Assured?
Your sum assured is the amount your nominee, which is usually a family member, will receive upon claiming death benefit. For most policyholders, a common expectation is that benefits from a life insurance plan should help their loved ones lead financially secure lives and have all their needs met.
To ensure that your policy meets your goals, you can start by calculating the needs of your family. This will include:
- their monthly expenses
- any debts and liabilities that they would be expected to fulfil after you are gone
- financial support for children’s educational needs, marriage, and others.
You can calculate all this and adjust for inflation. Also, account for any possible deductions in the sum assured. If you can expect any earnings from your financial portfolio in the future that your family can benefit from, factor those into your sum assured calculations.
You may also want this financial cover to last a while. Some people prefer calculating their sum assured based on their income. For example, you can start by calculating the number of years to your retirement. To reach a sum assured, multiply your annual income by the number of years to retirement. Another way is to aim for a sum assured that is higher than at least 10x your annual income.
Once you arrive at a sum assured, it is easy to use a term insurance calculator to arrive at a premium amount and frequency that is convenient to you.