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Life Insurance Calculator

A life insurance calculator or a term life insurance premium calculator is used for calculation of an individual's monthly or annual premium for their life insurance policy. Thus, it helps you evaluate the exact premium amount you should pay in order to achieve the desired sum assured.

Since it is a tech-abled tool, it is user-friendly and saves a great deal of time and effort. It also minimises possible errors that may occur due to manual calculation of premium. One of the highlights of the term life insurance calculator is the option of customisation for the convenience and comfort of the user. You can quite easily regulate the amount that your nominee is liable for, if you are not present.

A major advantage of a life insurance premium calculator online is that it enables you to simultaneously compare the premium that you would have to pay for different companies. Instead of going through the hassle of manual comparison, this online tool helps you get a fair idea and overview of the various premium rates on offer by different companies for specific periods of time, all in one glance.

Life Insurance Premium

Life insurance premium is defined as the amount that is paid to the insurance company in pre-decided increments for a life insurance policy. Premium maybe paid on a monthly or a yearly basis. If the premium amount is not paid on time, the policy will lapse.

Use Life Insurance Premium Calculators to Save Time and Effort

Life insurance premium calculators can save a great deal of time and effort to assess the premium amount that you need to pay for insurance policies. This would help you compare and contrast between various policies offered by life insurance companies to narrow down the best possible plan that suits your family's requirements and stays within your planned budget.

Top Factors that Decide Life Insurance Premium Rates

Life insurance premium rates are the amount that you pay for buying life insurance.

There are numerous factors that determine the life insurance premium rates, as follows:

Mortality Rate: The age of the insured will determine the predicted mortality rate of that particular age group. This is the most crucial factor for deciding the insurance premium. The younger the individual, the more likely that insurers are likely to offer a better rate of premium as the chances of a claim being made are less.

Earnings from investments: Since paid premiums are used to pay life insurance claims, the earnings from these investments are important from the company's point of view.

Personal habits and Health Record: Unhealthy lifestyle habits like smoking, alcoholism etc. will result in a 30% to 70% higher premium charged by life insurance companies in comparison to individuals leading a healthy lifestyle.

Coverage or Sum Assured: The greater the amount insured, the higher will the premium that you would have to pay.

Benefits of Life Insurance Calculator

There are various advantages of using a life insurance calculator which we can understand as follows:

Easy Calculation : A life insurance calculator allows you to calculate how much premium you would have to pay easily, without the hassles of manual calculation

Error-free :Since the calculation of insurance premium is automated with the use of a life insurance calculator, it is less prone to errors as compared to manual calculations.

Determine the Exact Amount :The life insurance calculator helps to determine the exact coverage that you would need to assure the safe financial future of your kith and kin.

Compare and Contrast Between Various Premiums :This calculator enables users to compare between the premiums being offered by various insurance companies. This will further determine which are the most suitable plans for you and your family, by weighing the premium amount and the time period for which you will be required to pay it.

Thus, you can avoid being over-insured or under-insured and your insurance policy will cover you sufficiently without being too expensive.

How to Use Life Insurance Premium Calculator

Now that we know the importance of a life insurance premium calculator and its benefits, let us take a step by step look at how to use it to your advantage.

Step 1 - The policy buyer must first enter important personal details that are required such as:

  • Date of birth
  • Age
  • Gender
  • Annual income
  • Number of children
  • Marital status

Step 2 - After entering personal details, you must enter details regarding the policy such as follows:

  • The sum that you wish to have insured
  • Desired length of the policy term
  • Premium Payment Term or Tenure
  • How often you would wish to pay (annually, semi-annually, quarterly, monthly)
  • Additional riders you may wish to include You can also make a selection regarding whether the payout should be lumpsum or as monthly income.

Step 3 - The last step ends with the insurance calculator displaying the best premiums and insurance policies available as per the individual's information. The plans suggested must then be compared and the most advantageous plan should be selected for future use.

Life Insurance Premium Payment Options

The premium payment frequency can be selected as per your convenience and preference. You can pay your premium monthly, quarterly, semi-annually or annually.

Life insurance companies provide various payment options for customers to pay their premium in a timely manner. The life insurance payment options are as follows:

  • Payment by Cash/Demand Draft/Cheque/Credit Card/Electronic Clearance System/ Direct Debit Facility at the insurer's office
  • Online payment via Netbanking or Bill Junction
  • Electronic Clearing Services
  • Standing Instruction to the Bank
  • Payment through Bill desk
  • Electronic Bill Payment
  • Payment through Visa Bill Pay
  • Online payment through wireless transfer
  • Online payment through payment wallet services
  • Payment through branch offices

Sample Life Insurance Premium Calculation

It is not an easy task to calculate insurance premium for customers. A premium calculator is the best solution for this. Let us take a look at how a sample life insurance premium is calculated with an example.

You can select certain fields as follows:

  • Plan Type: Sample Plan
  • Age: 31 years
  • Policy Term: 13 years
  • Premium Payment term: 8 years
  • Sum Assured: Rs 1000000
  • Accident Benefit (Rider): Yes (Rs 50,000)
  • Payment of Premium: Yearly/Semi-annually/Quarterly

Results of the premium calculation

  • Premium:
  • Annually: 1,16,030
  • Semi-annually: 60,335
  • Quarterly: 30,747
  • Monthly: 10,442

Add Rider Premium:

  • Annually: Rs 50
  • Quarterly: Rs 13
  • Semi-annually: Rs 26
  • Monthly: Rs 4.50

When considering the long-term, yearly premiums cost less than quarterly, semi-annual or monthly payments of premium.

FAQ on Life Insurance Calculator

How do you calculate how Much Life Insurance do you need?

The calculation of how much life insurance you need, depends on the following factors:

  • How many years your family would require to recover the income and services that is provided by you?
  • The amount of debt you owe?
  • The amount of financial help you would like to provide for your children’s' education?
  • The amount of savings and investments you have?
  • Any existing life insurance policies?
  • The after-tax income that your family has over and above your current income?

Keeping these factors in mind will help you to come to a fair conclusion regarding how much life insurance you will need.

What is the Rule of Thumb for Life Insurance?

The amount of coverage you need in the form of life insurance can be calculated by considering a few rules of thumb as follows:

  • Ten times your current income: This is a good place to start, but it does not consider all the factors. The drawbacks of this rule are that: • It does not take a detailed look at all the requirements of a family • It does not consider existing life insurance policies • It does not provide cover for stay-at-home parents

  • Ten times your current income and an additional amount for your child's college expenses This addition still does not cover all the aspects that should be considered when looking for a life insurance plan.

  • Calculate using the DIME Formula DIME stands for Debts and expenses, income, mortgage, education.

Debts and expenses: All the existing debts and expenses should be summed up

Income: The number of years that your family would require financial support must be calculated, and multiplied with current annual income. The number of years must be considered as the number of years it would take for your youngest child to graduate from school.

Mortgage: The amount of money that is needed to pay off mortgage is calculated

Education: The amount of money that is required for your children’s' college education is considered. The best way to find the ideal coverage for life insurance is to add up your financial obligations (mortgage, debts, future needs) and subtract liquid assets (savings, current life insurance) from this.

Do I Need Life Insurance if I Don't Have a Mortgage?

Life insurance is needed if you have dependents, even if you don't have a mortgage. The loss of the breadwinner's income in a family can affect a family's living conditions greatly and thus, the cover that life insurance can offer can be of great relief in such a situation.

How Long do Life Insurance Policies Last?

The term of life insurance policies depends upon the needs of the policyholder. It can last as long as obligations exist for the policyholder. Generally, life insurance policies are sold for 5 years, 10 years, 15 years, 20 years, 25 years, 30 years and so on, in multiples of five.