Using a Term Insurance Calculator to Estimate Coverage Needs

A term insurance calculator is an extremely useful financial tool that helps simplify the process of choosing the variables of your term plan. It is an online instrument that you can use to factor in the necessary details to determine exactly how much sum assured would provide sufficient coverage for your loved ones in the event of your demise.

How to use a term insurance calculator?

Here is a list of the details that you will need to furnish in the term insurance calculator for a customised result:

1. Your age or date of birth and gender (play a role in determining life expectancy)
2. Your occupation and annual income (helps determine how much premium you will be able to pay comfortably and estimate the approximate expenses of your household)
3. Area code (helps approximate the risk factor in your life)
4. Habits involving the consumption of tobacco or nicotine products (helps determine health and wellbeing variables and life expectancy)

After filling out the initial details, the term insurance calculator will provide viable term plan options that are best suited to your needs and those of your loved ones. You can choose the type of plan that benefits you most and then you can determine the total coverage based on the premiums for the term plan as calculated by the instrument.

Types of term insurance plans

Before we move on to how to determine the optimal coverage, you must select the type of term plan such as:

• An increasing term plan that increments the sum assured by a predetermined percentage every year
• A decreasing term plan wherein a part of your sum assured is deducted annually to repay loans and debts in order to minimise liabilities
• A level term plan that keeps all your variables intact including zero changes to the sum assured, premium, and tenure.
• A term plan with a return of premium ensures that if you survive the policy tenure then the insurance provider returns the premiums that you paid over the years toward the policy.
• A single payment term plan wherein you only pay a premium once in a lump sum amount to secure the policy.

Optimising coverage with a term insurance calculator

Once you have made the selection, the term insurance calculator will present the variables that you can modify to estimate the appropriate coverage for your loved ones. On the term insurance calculator, you will need to feed the following details:

An estimated coverage amount, i.e., your desired sum assured. Don’t worry, it’s not locked in. It is only to get an estimated rate of premium and you can make changes as per your preferences.

The tenure of your term plan. It is the time frame for which you want to be insured. This can range from 10-99 years as per your personal needs and circumstances.

The duration of premium payments. You don’t have to pay a premium for the entire tenure of your term plan. The term insurance calculator will determine a premium rate that helps cover the total premium you must pay and divide it into suitable instalments distributed over the duration that you choose to pay the premium.

The frequency with which you would prefer to pay your premiums. You can pay premiums annually in lump sum amounts or reduce the financial load by making monthly payments. Based on your premium payment frequency, the term insurance calculator will estimate the division of premiums to be paid for the term plan.

Finally, you must state the method of payment for death benefits for your beneficiaries. You can choose to have them receive a lump sum amount or as monthly income.

How the variables affect the premium? 

Every choice that you make will impact the premium that you need to pay towards the term plan. For instance, if you choose a higher sum assured with a lower duration for premium payments, then the rate of premium to be paid will be high to compensate for the total premium to be paid. Similarly, if you choose a high coverage and couple it with frequent and long-term premium payments, then you may receive a lower rate of premium.

Once you factor in the premium that you will need to pay based on the duration of premium payments, the frequency of premium payments, and the tenure of your term plan, you can make changes to the coverage you selected. You can increase or decrease the coverage to check the modified rate of premium that you will need to pay.

The term insurance calculator helps you finalise the variables of your term plan that suit your financial needs and obligations without stressing you out. You can make changes to every variable on the term insurance calculator till you can determine the conditions of the term plan that seem favourable and comfortable. The rate of premium, in particular, should be a suitable amount that you can pay without any stress. Even if you are an NRI, you can select the variables to suit your specific needs on the term insurance calculator. The tool can truly simplify the decisions that you need to make to provide appropriate coverage for your loved ones.

Disclaimer: This article contains sponsored marketing content. It is intended for promotional purposes and should not be considered as an endorsement or recommendation by our website. Readers are encouraged to conduct their own research and exercise their own judgment before making any decisions based on the information provided in this article.