Raising a loving family is one of life’s greatest blessings. You attempt to address your family’s emotional and financial requirements. Who, however, would your family look up to if you could no longer care for them?
The willingness to acquire insurance coverage thus becomes vital at this point. Term insurance protects your family against the financial dangers that may arise due to your untimely demise. Your loved ones can utilise life insurance to pay off mortgages, cover day-to-day living expenses, and accomplish numerous life goals.
However, purchasing a life insurance policy alone is insufficient. The goal is to ensure that you have sufficient life insurance coverage to satisfy your family’s needs. Consequently, the issue arises: how much life insurance do you require?
Are you looking for a calculator for life insurance?
Table of Contents
Term Insurance Calculator
A term insurance calculator determines an insurance policy’s monthly or annual premium. As a result, it helps you determine the premium you must spend to obtain the maximum assured amount.
1. Human Life Value
Using Human Life Value, the present value of your potential revenues, expenses, debts, and savings is determined (HLV). The HLV is often used to calculate the amount of term life insurance needed to protect the financial future of your beneficiaries in the event of your demise.
When determining your HLV, seven elements must be considered. The following are:
- Your occupation
- Your age
- Your employment benefits
- Your gender
- Your target retirement age
- Your annual salary
- Your spouse’s and your child’s financial documents
2. Income Replacement Value
Using this method, you could be eligible for a life insurance policy based on the deceased breadwinner’s lost income. It is a straightforward method of determining one’s life insurance coverage needs based on the policyholder’s annual income.
Life Insurance Coverage = current yearly wage multiplied by the years before retirement.
For instance, if your annual salary is 4 lakh Indian Rupees, you are 30 years old, and you plan to retire in 30 years, you should consider the following factors. In such a case, the life insurance required is INR 12 crores. This further helps you reduce taxes with term insurance tax benefits.
3. Underwriters’ Thumb Rule
According to this concept, the minimum level of coverage must be a multiple of the insured’s age-adjusted yearly income. Those in the age bracket of 20-30 must have life insurance coverage equal to 25 times their annual income, but those between the ages of 40 and 50 may opt for coverage equal to 10 to 15 times their annual income.
4. Premium as Percentage Income
According to this procedure, the life insurance premium must equal 6% of the breadwinner’s annual earnings plus an additional 1% for each dependent. Assume the client’s gross annual income was 5 lakh rupees and that they have a spouse and a young child to care for. According to this method, the suggested premium would be INR 40,000. * Standard T&C Apply
Aspects Influencing Insurance Premium
The amount charged by the insurance provider to the policyholder is known as the premium. The premium may be assessed quarterly, semiannually, or annually, as mutually agreed upon by the suppliers and purchasers. If the premium is not paid on time, the scheme terminates and, along with it, term insurance tax benefits.
- Age: Your date of birth is undoubtedly one of the most influential factors on your life insurance price. It is common knowledge that younger policyholders pay lesser rates. As you age, the likelihood that a provider will have to pay a claim rises. Thus they increase your payable amount to compensate for their losses.
- Gender: Women have a longer expected lifespan than men. In India, the average longevity for females is 69.42 years, while the average lifespan for males is 68.24 years. Although the difference may appear negligible, you would be astonished to learn that insurance companies take these numbers extremely seriously. Therefore, women typically pay slightly less for life insurance than their male counterparts.
- Healthcare Background: Before providing coverage, insurers may request a medical evaluation and access to the patient’s medical history. Your premiums will increase if you have a long list of medical issues, such as cancer, brain ailments, etc. Insurers would also evaluate your weight, total cholesterol level, heart rate, and other indicators of future health issues. In the event of a severe, terminal medical condition, an insurance policy may not be permitted.
- The Coverage Policy: The type of coverage you select will also impact the cost of your premium. Plans with a larger sum assured tend to be more expensive than those with a smaller value assured. The duration of your insurance is also a factor, as policies with a longer waiting time yield greater returns.
When it comes to preserving life, we typically do everything possible. Therefore, acquiring a suitable term insurance policy is a practical and vital measure.