When you plan to buy life insurance, a term insurance plan is one of the most common plans you will be suggested to buy. The term plan offers a financial safety net and provides your family with a financial corpus when you are not around.
Like any other life insurance plan, you need to pay premiums to buy a term insurance plan. And to know how premiums can be paid in a term insurance policy, you will need a term insurance calculator.
However, before learning more about Term Insurance Calculator, let us understand term insurance policies.
What is a Term Insurance Policy?
A term insurance policy is a type of life insurance policy that offers financial safety in the event of an insurance holder’s demise. When buying a term insurance policy, you can choose the coverage range and period for which you want to get insured. If the insurance holder dies in the insurance period, the family can claim the insurance amount.
Features of a Term Insurance Policy
Term insurance policies have certain salient features. They are:
- Only the death benefit can be claimed for a term insurance plan. After the plan matures, no maturity benefits can be claimed.
- Term insurance policies provide a variety of coverages so that you get a comprehensive cover.
- The policy coverage period goes up to thirty to thirty-five years.
- Bonuses cannot be claimed in term insurance plans.
- You can select various additional features called riders to increase the range of the coverage offered by the policy.
- Almost all term plans offer rider benefits along with the basic plan.
- Death benefits can be claimed in a lump sum, in monthly installments, or a combination of both.
What does a Term Insurance Calculator do?
A term insurance calculator is an online calculator that finds the total premium payable under a policy. The calculator considers all the relevant coverage factors and computes the premium payable.
The premiums of a term insurance policy depend on many factors, including:
- Age
- Total sum assured
- Term/Period
- Premium payment period and frequency
- Occupation
- Medical history
- Physical health
- Lifestyle habits
- Other factors
What are the Types of Term Insurance Calculators?
There are a variety of term insurance policies. As the plans differ, their premiums differ too. Hence, there are different types of term insurance calculators, depending on the types of term plans. The following are the different types of term insurance plans along with their term insurance calculators:
- Level term plans: In these term plans, the sum assured does not change the coverage duration. These are the simplest term plans that use the basic term insurance calculator to find the premium.
- Rising term plans: When the total sum assured rises with every passing year by a certain percentage, it is called a rising term plan. Although the coverage increases, the premium remains the same. However, the premium required to cover the cost of the increasing coverage is computed.
- Declining term plans: Opposite to the rising term plans are the declining term plans. In these plans, the total sum assured decreases each year. These policies are generally provided with loans to cover decreasing debts. This plan needs a different term insurance calculator to find the appropriate premium due every year.
- Premium return plans: The premiums paid are refunded under this policy after the plan matures. This policy has maturity benefits. A premium return term insurance calculator is used to calculate its premiums, with the premiums being higher than usual term insurance plans.
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How to Use a Term Insurance Calculator?
An appropriate term insurance calculator can be easily found online. All insurance providers provide a calculator with their term insurance policies. You can easily use the calculators an insurance company provides and get the premiums for the term insurance you plan to buy.
Different insurance companies offer different term insurance calculators to calculate the premiums of various term insurance plans. Usually, the process of using a term insurance calculator is similar across multiple websites. The standard method to calculate premiums using an insurer’s website is given below:
1. Enter your term insurance policy coverage details that include the following
- Gender
- Marital status
- Date of birth
- Annual income
- Lifestyle habits
- Previous illnesses
- Sin indulgences (if any)
- Total sum assured level
- Your name, mobile number, and email (these can be optional)
2. You can now view some of the best term insurance plans available in the market.
3. Compare the plans best suited to you by filtering them based on their coverage, premiums, and riders.
4. You can take optional riders if you wish, and the premium will be updated, depending on your choice of riders.
5. Once you choose the plan and your coverage, you can use the term insurance calculator to know your monthly premium outflows and how efficiently you can make the premium payments. After this, you can pay the premiums online and buy your policy.
Conclusion
Knowing why and how best to use a term insurance calculator is winning half the battle on your journey towards making a successful insurance investment. Knowing how to use tools like a term insurance calculator further helps you on your journey towards balanced financial planning.
