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22:20 BST, May 23, 2024Are you struggling to choose the right term life insurance policy? Let’s simplify it for you. The primary difference between various term policies lies in their premium structures. If you’re unfamiliar with the term, the insurance premium is the amount you pay the insurer for your life coverage. You have the option to make your premium payments annually, monthly, or quarterly.
To simplify the entire process, term insurance premium calculators are available to determine the premiums of various policies. This information can help you compare and choose the suitable policy. This article will detail how to use the calculator to achieve the desired results and the common types of premiums. Scroll down for more information.
What are the Different Types of Premiums?
Before learning how to use a term insurance premium calculator, you must gain prior knowledge about the three premium options for term insurance. This will help you to understand the framework of insurance policies. Let us dig deeper into the kinds of premium options.
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Level Premium
In this case, the premium amount will remain consistent over the stipulated period. The premium here is calculated mainly based on the policyholder’s age and health condition. However, there may be other factors as well. Level premium is the best option for those seeking stability and consistency throughout the procedure.
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Increasing Premium
This is the second option, where the policyholder starts the plan with a lower premium and increases the amount with each passing year. This is suitable for individuals who may have lower income at the beginning as they simply cannot afford a high premium but anticipate higher earnings in the future. This means now you can secure your future right from the start of your career.
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Decreasing Premium
The approach here is just the opposite. The insured begins with a high premium but gradually reduces the amount during the final years. If you are investing in a retirement or pension plan, opting for this option might be more convenient. This will help retain the ongoing plan but at an affordable premium.
How to Use the Insurance Premium Calculator?
Since you’re familiar with insurance premiums, let’s explore how to effectively utilise a term insurance premium calculator. Here, we will provide a step-by-step guide to using this online tool.
The entire procedure can be completed in six steps. They are as follows,
- The first interface of the tool will require you to feed in some basic details like the name, age, gender, lifestyle habits, location, etc.
- Secondly, you must provide your financial details to help them understand how comfortably you can pay the premium. The details will include monthly income and expenses, ongoing loans, etc.
- Next, you will have to choose the term for your policy. This is the period for the investment to mature. This might be 5, 10, 20 years or more. You need to select according to your abilities and needs.
- Now, you have to decide how much you want to insure. It is commonly known as sum insured. Choose the amount carefully and at your convenience.
- Once you have filled in the details, the tool will calculate your annual or monthly pay amount. In some cases, it shows you the total coverage offered.
- As you gather similar information on several insurance plans, compare them to get the most suitable one based on your needs. Moreover, some calculators can also show the premium details of different companies for you to compare and choose.
One thing to remember is the result displayed is only an estimation. It is best to contact the company directly for a more comprehensive understanding. This is because multiple factors determine the premium,
- Age: The lesser your age, the less premium it is. As you age, you are more likely to have different health conditions. Hence, the premium is higher.
- Health: The more healthy you are, the lesser the premium you pay. If you have pre-existing medical conditions, then the premium will be higher.
- Lifestyle Habits: If you have healthy habits like exercising, eating healthy, etc., the premium is likely less.
- Gender: An important factor in determining insurance premiums due to differences in life expectancy and risk factors between men and women. Women tend to pay a lesser premium than men.
- Intoxications: If you have habits like frequently consuming alcohol or smoking, insurers consider you to be more easily succumbing to various health issues. Hence, the premium automatically increases.
- Medical History: Besides pre-existing conditions, insurers also identify if there are any potential health risks. Moreover, they also consider the recovery percentage from pre-existing illnesses.
- Profession: If you work in hazardous environments like mining, oil, fisheries, etc., you must pay a higher premium. As these job profiles negatively impact your health.
Final Thoughts
We understand that choosing the right policy plan can be quite challenging. Utilising an insurance calculator can provide comprehensive information about various plans and premiums. However, ensure you provide the right details to achieve the desired outcome.
Interesting Related Article: “6 Things to Know About Life Insurance“