Term insurance is a great addition to any investment portfolio, not with the objective of earning future returns, but gaining peace of mind. A term insurance policy ensures pure life coverage for the insured individual, guaranteeing financial security for his/her nominees in case of his/her unfortunate demise within the policy period. The insurance company pays the sum assured, which is a fixed amount, to the policyholder’s nominees in this scenario. This amount helps the family members maintain their financial standing in a time of crisis, meeting monthly costs, future goals, debt repayment, and other needs.
For availing life coverage throughout a specific tenure, the policyholder has to pay premiums to the insurance company. These are based on several factors including the sum assured amount, policy tenure, age of the individual, medical condition/history of the policyholder, and so on. A term insurance calculator can help you work out the life coverage that you require in a simple manner. Here’s learning more about it in this article.
What is a term insurance calculator?
A term insurance calculator is a digital tool that helps you estimate the life coverage amount that you will require in your term insurance policy. This naturally enables you to take a better and more informed decision with instant calculations.
Using a term insurance calculator
Using a term insurance calculator is easy. Here are some points that you should note:
- Various insurance platforms and companies have term insurance calculators on their websites.
- You have to find this calculator and then enter values like your annual income, number of years till retirement, and the income increase percentage if available. You should also enter the income percentage that you spend only on yourself.
- The calculator will give you an estimate of the life coverage that you require for the tenure in question.
- Several other companies have calculators with varying parameters.
Advantages of term insurance calculators
Here are the biggest advantages of using term insurance calculators:
- Using a term insurance calculator saves you time and energy in working out the coverage amount. It also lowers human errors and inaccuracies. You only have to fill up the fields and get instant results.
- You get an estimated coverage amount which will help you take a better decision while buying your term insurance policy. You can take informed decisions after knowing about your minimum future requirements.
- These calculators also enable better planning on your part, while removing ambiguities and grey areas swiftly. You will know the life coverage needed by your family and then you can plan your finances better. You can subsequently use a premium calculator to work out the payable premium for your chosen coverage amount.
- You also get a head-start in terms of comparing plans from various life insurers. Getting an idea about the coverage amount will help you assess which policies are suitable for your needs and compare them on the basis of their costs and other features.
You should also keep a few other tips in mind while buying term insurance. On the question of coverage, while using a term insurance calculator is an efficient way to do things, make sure that you account for future inflation and evolving family requirements or goals. You should also include any current loans or debts into your calculation.
These should not be left out while calculating life coverage over a certain tenure. Make sure that you choose an insurance company with a good track record in terms of claim settlements. You can check the claim settlement ratio (the ratio of claims received to the number of claims settled for a specific period) of any insurance company for getting an idea. You can also take professional guidance on choosing suitable term insurance coverage.
