Nowadays, a term insurance plan has become more of a necessity. Nobody can say when a person will die. Life is uncertain, and we need to make sure that the future of our family is secure. A term life insurance plan is a type of life insurance plan that will benefit the family financially after the insurer’s death. If you are buying a term insurance plan in simple language, then the plan will make sure that your family gets financial benefits after your death.
A term insurance plan helps a person to secure his/her family’s future. Everybody buys a term insurance plan nowadays so that they can enjoy the coverage at an early stage. It is important to buy the plan as early as possible so that you can benefit from it. If you are buying a term insurance plan after some years of your job, you might not enjoy the insurance benefits.
How Much Term Life Insurance Cover A Person Should Have?
This is one of the most asked questions that one might find on the internet. Calculating the amount of money that will secure your family’s future is quite difficult, as nobody can see the future. However, we can always have an approximate amount of money to help our family live a secure life for quite some time.
There are various methods to calculate the approximate amount of money that will benefit your family after your death. This approximate amount of money is the sum that you need your term insurance plan to cover. To know the approximate amount of money that your insurance needs to cover, you need to calculate the expenditure of your family and other expenses.
1. Family’s Monthly Expenses
The first thing that you need to calculate is the monthly expenses of your family. You will get to know the amount of money that your family needs for a month through this. This part consists of groceries, LPG gas, electricity bills, water bills, rent, education fees, and other essentials, helping your family survive for a month.
You can say that your monthly salary is approximate the money that your family needs for a month in simple language. For safety, you should add a certain amount, which will come in handy. After that, multiply this amount by 12 months, and you will get the approximate amount of money that your family needs to survive for a year.
2. Debt Payments
This is one of the most crucial parts while calculating the insurance coverage amount. The debts section consists of all the debts that you have, like loans, mortgages, EMIs, and many more. Banks and people will anyhow take their money, even after your death. It is better to add the debt amount in the calculation, along with the interest rates.
It will help your family from any future trouble due to debts. By adding the debt amount, you also get to know the exact time that your family needs to clear the debt.
3. Future Expenses
Nobody can tell the exact amount that your family will need for the future. However, you can always calculate the approximate amount, which will further help your family after your death. To calculate the future expenses, you need to sort out all kinds of expenses and then categorize it into basic needs and miscellaneous. With this method, you will get to know the things that your family needs to survive.
If you have a kid, you also need to add up the child’s educational costs. As we cannot say when the prices will surge, it is safe to have a reasonable amount of money for educational purposes.
Features & Benefits Of Term Life Insurance Plan
There are certain features and benefits that you would get after you buy a term insurance plan. Some of these features are stated below.
i. A term insurance plan gives financial security to the family of the insurer.
ii. After the death of the insurer, the nominee gets the insurance money.
iii. These plans provide a high sum for low premiums, which makes it far better than other plans.
iv. The coverage of the term insurance plans is up to 30 to 35 years, which means you benefit from the insurance for a long time.
v. There are even options such as “riders,” which allows you to increase the scope of the coverage of the insurance plan.
vi. The death benefit of the insurance is given to the family in installments, in a lump sum, or as a combination too.
Types Of Term Life Insurance Plans
There are 6 types of term insurance plans which are available in the market. Before selecting a term insurance plan, it is better to know the type of plan and the benefits that it will provide you.
i. Return Of Premium Plans:
In this kind of term insurance plan, you even get maturity benefits. The premiums are returned to the insurer if he/she is alive until the plan matures.
ii. Increasing Term Plans:
This is the kind of plan where you can increase the amount of your insurance plan at the annual frequency in the plan periods and keep the premium amount the same. The premiums in this plan are different from others.
iii. Decreasing Term Plans:
In the decreasing term plan, the assured amount keeps on decreasing until it matches the needs of the insurer. This kind of term life insurance is perfect for people who have taken a home loan or have a large EMIs. In such cases, the assured amount decreases at a specific rate until the EMIs are cleared.
iv. Convertible Term Plans:
As the name suggests, convertible term plans are the kind of plans which you can convert into any other plan at any time. Say, if you are buying a convertible term plan for 30 years, then you have the option to convert it any time into whole life insurance or any other type of plan.
v. Term Plans With Riders:
As the name suggests, this particular term insurance plans have riders in it. Riders are extra plans of benefits that you can have in a term insurance plan. They include critical illness covers, accidental covers, and many more.
Term Life Insurance Calculator
A term insurance calculator is an online calculator that calculates the approximate amount of premium which an insurance plan will cover. The insurance calculator speculates all the factors and then gives you the exact amount of premium your chosen term insurance plan will cover.
Types Of Term Life Insurance Calculator
There are various types of term insurance calculator that you can use for calculating your insurance premium. You can select the best calculator based on your insurance plan.
i. Term Life Insurance Plan Premium Calculator:
This type of insurance calculator helps you calculate the premium amount you need to pay to gain coverage at a certain age.
ii. Investment Plan Premium Calculator:
This type of insurance calculator helps you analyze your investments in the policy and gives you the difference.
iii. Pension Plan Premium Calculator:
In this type of insurance calculator, you can calculate the amount of money that you need to invest to get the desired amount of money as a pension after your retirement.
iv. Child Insurance Premium Calculator:
This type of insurance calculator helps you analyze the amount of money you need for your child’s education and other related expenses.
Steps To Use The Term Life Insurance Calculator
Here are the steps which you need to follow to use the insurance calculator perfectly.
- Firstly, you need to choose the type of insurance calculator which would suit your plan. After choosing the perfect calculator, you need to fill out your name, birth date, gender, annual income, number of children, and marital status.
- Now, you need to enter the amount of assured money you need and for how many years. Not only that, but you also need to state how you want your family to get the money, i.e., in monthly installments or all at a time.
- After filling out all the details, the insurance calculator will state the best plans for you and state you the benefits and approximate amount that you will get from the insurance plan.
With the insurance calculator, you can compare different plans and select the best one for you and your family.
Factors To Consider Before Using Term Insurance Calculator
There are certain factors that you need to consider before using the insurance calculator. These factors are stated below:
- Insurance requirements
- Age of the insurer
- Coverage amount
- Gender of the insurer
- The chosen policy term
Benefits Of Using Insurance Calculator
There are certain benefits that you get while using the term insurance calculator. Some of these benefits are stated below.
i. The calculator provides you with the estimated amount of premium that you need to pay.
ii. The calculator gives you the best choices for insurance plans based on your requirements
iii. It is free of cost and lets you find the premium amount easily
Frequently Asked Questions
1. What documents do I need for using an insurance calculator?
You don’t need much documents, though you need to provide your name, date of birth, gender, type of occupation and the type of policy term you have chosen.
2. What is the best insurance calculator to use?
There are various insurance calculator designed for specific purposes. If you want to calculate the education expenses of you child, then there is child insurance calculator, for pension calculation, there is the pension plan calculator and as such. For different types of plans, there are different types of calculators.
3. Is decreasing term plans beneficial?
Decreasing term plans are best for people who have huge loans or EMIs. In such type of plans, the assured amount keeps on decreasing till the loan is cleared.
4. Should I take a life insurance plan in my early job days?
It is better to op for a life insurance at an early age, as it lets you have the benefits for a longer time.
5. What is the right time to get a life insurance?
You can get a life insurance after 6-7 months of you job, as it would be the optimum time to know what kind of insurance you need.
Having an insurance plan is important, as it secures your family’s future. As life is unpredictable and we do not know what might happen next, it is better to take precautions to secure our family’s life. Insurance policies help you in getting the future of your kids and family covered. They not only provide your family with benefits but also help them in coping up with the world. There are various types of insurance plans as I have stated out in the article. Each plan is unique and will help you in knowing which term plan will benefit you.