How To Calculate The Right Term Insurance Premium For Your Family?

Juliet D'cruz

Updated on:

Amidst the several uncertainties of life, an effortless and reliable way to safeguard the future of your loved ones is by purchasing term insurance. These insurance plans are the most cost-efficient way to secure your family and dependents from financial risk and provide them optimal protection at nominal costs.

Term plan consist of affordable premiums and a variety of buying options, they’re highly preferred by consumers. This article discusses various ways to calculate term insurance premiums, which allows you to make the most out of your investments. However, before getting into the topic, you should consider knowing what a term plan is.

If you already have an insurance policy, you may wonder how the insurer decides a specific premium. The payments made towards a policy are used to provide you an adequate cover. It depends on a variety of factors like age, coverage preferences, zip code, information, and a lot of other factors.

What is Term Insurance Premium?

When you purchase a term insurance policy, the insurance company charges you money in return for the coverage offered. This ongoing cost is termed insurance premiums. Based on the preferences of your policy, you may choose to pay premiums on different terms such as monthly, yearly, quarterly, and so on. There are even some plans that allow you to pay the complete amount upfront.

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Additionally, many insurance companies also provide you with varying ways to pay your premiums with options like credit and debit cards, automatic payments, money orders, and many more. If you choose to zero in your preferred policy with a paperless billing option, you may even be eligible for several discounts.

How To Calculate Term Insurance Premiums? 

There are several factors considered by an insurance company to calculate your insurance premiums as stated below:

  • Age

An insurer considers your age because it allows them to predict the importance of life insurance for you. As younger people are less prone to medical ailments, the premiums are mostly cheaper. Moreover, as you age and require medical attention, your premiums will likely increase too.

  • Coverage Type

When you purchase term insurance, you can choose from several different cover options as per your requirements. Keep in mind that the more comprehensive the coverage, the more expensive the policy will be. For instance, if you have a term plan that offers only death coverage, it’ll require lesser premiums as compared to term insurance with a return of premium.

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  • Coverage Amount

The lesser the coverage you opt for, the cheaper the premiums you need to pay, regardless of what type of insurance coverage you choose. That’s because if you’re covered for a longer time, the insurance company is more likely to receive a claim.

  • Personal Information

Depending on the type of term insurance you choose, the insurer may also ask you about your personal things such as driving record, claim history, smoking status, health status, job, hobbies, where you live, and so on to determine the risk on your life. This allows them to determine how likely you can make a claim.

  • Actuarial Tables

A lot of insurance companies also hire actuaries that use statistics and mathematics to assess the risk of financial loss and predict the likelihood of an insurance claim, provided that the company has already asked you for certain pieces of information. These experts make something known as ‘Actuarial Tables’, which is transferred to the underwriting team of the company who determine the policy premiums based on the information offered.

How To Use Term Insurance Calculator? 

A term insurance calculator is the simplest way to estimate the required premiums you need to pay for an insurance policy. Here’s how you can use a term insurance calculator in just three simple steps:

  • Enter your details like age, marital status, gender, and so on
  • Specify the required sum assured you need along with an expected timeframe. Moreover, you also need to choose the mode of receiving benefits from options like a lump sum or recurring income. Lastly, submit the provided information on the tool
  • Now, the term insurance calculator will automatically assess your details and recommend you some preferred insurance plans as per your requirements. 

You can easily compare multiple plans through the tool and make a decision wisely

4 Best Term Plans Available in India

  • SBI Life eShield

The SBI Life eShield is a non-participating and non-linked term insurance plan that provides high coverage at nominal premiums. It features a wide range of benefits at a very breakthrough price. Moreover, the plan even features additional benefits for non-smokers and provides discounts as well.

  • HDFC Click 2 Protect Plus

The Click 2 Protect Plus by HDFC is also a term plan that keeps you protected from three different kinds of uncertainties in life namely disease, death, and disability. It allows you to choose from nine different options to help you personalize your investments as per your requirements.

  • Canara HSBC Oriental Bank of Commerce – iSelect Star Term Plan

The Canara HSBC Oriental Bank of Commerce – iSelect Star term plan is a comprehensive security cover to protect your family from all the uncertainties of life. It’s a very flexible term plan that can be easily customized as per your requirements at different stages of life.

  • Aegon Life I-Term Plan

Aegon Life I-Term is a pure term insurance policy that features an inbuilt terminal illness benefit. Moreover, with this plan, you can gain coverage of up to 80 years. The plan can be easily purchased online without any hassles or mediators involved.

Bottom Line

If you want to ensure the complete protection of your family and dependents from the uncertainties of life, you should invest in a term plan as soon as possible. Moreover, make sure you calculate the estimated premiums before buying to make the most out of your financial investment.