Buying a suitable term insurance plan for your family can be challenging if you do not know how much cover you need. A term insurance calculator assists in assessing the required cover amount for the financial protection of your loved ones. It provides an estimate of the premiums you need to pay, helping you plan your finances accordingly. Since each insurance policy has a different premium based on the insured’s requirements, using a term insurance calculator ensures an informed decision.

What are the benefits of using a term insurance calculator?

Getting a term insurance policy is crucial to help your family cope with financial distress after your demise. The cover amount you choose must be sufficient to support their needs and expenses.

Listed below are some benefits of using a term insurance calculator:

• It helps you compare the premiums of different term plans in terms of duration and coverage.
• It provides an estimate of the premium you will need to pay based on the chosen policy.
• It enables you to plan your finances and create a budget for your expenses in advance.
• It helps define the future of your investments before finalising a term plan.
• It allows you to select the right insurance policy to protect your family from financial distress.

There are various term insurance policies to choose from, and a term insurance calculator helps in comparing them based on your needs. If you are between 25 and 40 years of age, your coverage requirement would be higher, and the premium would be calculated based on the selected payment frequency—monthly, quarterly, or annually. A term insurance calculator assists in choosing the most suitable option.

Five things to consider while using a term insurance calculator

A term insurance plan is a type of life insurance policy under which a certain sum is paid to the beneficiary if the insured dies during the policy term. The insured person is covered for a specific period, known as the ‘term’ of the policy.

If the insured passes away before the policy term ends, the beneficiary receives the death benefit. Some term insurance plans also offer a return of premium feature, wherein the policyholder gets back all the premiums paid if they survive the policy term.

1. Duration of the policy

The duration of the policy term depends on the insured’s age and health. If the insured passes away before policy maturity, the death benefit is provided to the beneficiary. Choosing the right duration ensures that your family’s financial needs and expenses are covered adequately.

2. Amount of cover

Consider the coverage required based on your financial needs. If you purchase a term insurance policy at a younger age, the cover should ideally be at least 15 times your annual income. If you are above 40, the coverage should be at least 10 times your annual income to ensure financial security for your family.

3. Frequency of premium payment

The premium payment term refers to how often the premium is paid—monthly, quarterly, semi-annually, or annually. You can select the payment frequency based on your financial capability and existing liabilities. Some term insurance plans also offer a limited premium payment option, allowing you to pay premiums in a single instalment.

4. Annual income

Before selecting a term insurance policy, consider your annual income. A term insurance calculator helps estimate the premium based on your income and financial needs, ensuring you choose an affordable yet comprehensive plan.

5. Goals and budget

Review your financial goals, such as your child’s education, marriage expenses, and retirement plans, before purchasing a term insurance policy. Knowing your long-term and short-term goals helps in creating a balanced budget and selecting the right cover amount.

How to use an online term insurance calculator?

An online term insurance calculator simplifies the process of estimating premiums. The first step in using the calculator is to enter your details accurately. These include:

• Full name
• Gender
• Date of birth
• State of residence

Next, you need to input additional details based on the selected policy type, including:

• Payment frequency
• Life coverage amount
• Plan options
• Queries regarding lifestyle and health

The estimated premium varies depending on the details provided. Therefore, ensuring accuracy in the information entered helps in obtaining the most precise estimate.

How to choose the right cover amount for your term insurance plan?

The estimated premium of a term insurance plan depends on the information shared while using a term insurance calculator. The sum assured is calculated based on your financial needs and future liabilities.

Follow these steps to determine the ideal cover amount:

• Calculate the present cost of your future financial goals, such as home renovations, children’s education, marriage expenses, or retirement.
• Consider your current and future liabilities, including home loans, car loans, and business debts, and add them to your total financial goal cost.
• Subtract liquid investments such as fixed deposits (FDs), public provident fund (PPF), and pension funds from the total balance.
• The final amount derived from this calculation represents the minimum sum assured required to meet your financial obligations.

Conclusion

A term insurance policy is one of the simplest types of life insurance plans. It provides financial security for your family in the event of your untimely demise. A term insurance calculator helps in estimating the required cover and the corresponding premiums, ensuring you select an appropriate plan. By using a term insurance calculator, you can compare different policies, plan your finances efficiently, and secure your family’s future. Investing in term insurance is a crucial step toward financial stability, ensuring your loved ones remain protected even in your absence.