If you’re looking to purchase a term insurance policy, you might be thinking about searching for a good and reliable term insurance calculator for calculating your insurance premium. Are you wondering what ‘premium’ is? Simply put, it is a monthly repayment for policies that cover your life.
The payable amount depends on a wide range of factors such as your required coverage, health history, personal information, habits, zip code, and a lot more. It can also go higher or lower, depending on your lifestyle.
Insurance Premiums – An Introduction
When you purchase a term insurance policy, the insurance service asks you for a small amount to be paid in return for the provided coverage, which is known as an insurance premium. Based on the preferences of your policy, the premium can be payable on a semi-annual basis, or every month.
Some exceptional cases may also require you to provide the complete premium amount upfront, before the coverage period of your policy starts. Moreover, a lot of insurance companies offer several payment options such as credit and debit cards, cashier’s checks, or money orders.
If you sign up using billing options that don’t require any paperwork, or wish to pay all your premiums in a lump sum, you can qualify for a lot of additional benefits and bonuses as a token of gesture from the insurance providers.
The Standard Cost of Insurance Premiums
It’s said that you may own the same car as your neighbor, and still end up paying less or more for insurance, while the coverage is the same for both of you. There’s no definite price for the insurance premiums, and you need to compare offers from numerous insurers to grab a good deal.
As a general rule of thumb, better coverage simply means that you’ll have to pay higher premiums. However, don’t let this fact influence your decision solely based on the price of the policy for the sake of saving a quick buck. You need to understand what’s the role of the policy in your life and how it can help you with your current situation. This will make it easier for you to shortlist insurers while choosing a plan that works the best for you.
How to Calculate Term Insurance Premiums?
Several factors determine the number of premiums that you need to pay for your insurance policy. Here’s a list that will help you predict your premium amount based on a variety of factors:
1. Coverage Type
When you purchase a term insurance policy, you need to choose from a wide range of options. As the coverage of your plan broadens, your premiums will get even more expensive. For example, a base plan will have lower premiums than a plan with additional riders.
2. Personal Information
Based on the type of policy you’re looking to purchase, the insurance company might inquire about your personal information and take a closer look at your life to determine your personality, behavior, and several other traits.
This is done to determine whether or not you’ve provided reliable information. Moreover, insurers will also ask about your lifestyle habits such as drinking or smoking. If you lie while responding to these questions, your family may not be able to get the claim settled due to false information.
3. Coverage Amount
As stated above, the lesser coverage you take for your life, the cheaper premiums you’ll have to pay under the plan, regardless of the type of policy you choose. For instance, if you get health insurance with a higher deductible, you’ll pay lower premiums for the same coverage.
4. Age
As humans have a limited lifespan, insurance companies inquire about your age to be able to predict your reason to get term insurance. For example, if you’re young and look forward to purchasing health insurance, you’ll have to pay lesser premiums because you’re less likely to need medical care.
Moreover, as you age through your life, the premium amount begins to increase because you need more medical attention. In simple words, the more you age, the higher your payable premiums are likely to be.
5. Actuarial Tables
Actuaries are business professionals hired by insurance companies to determine the risk of financial loss with the help of statistics and mathematics. This is done to predict your likelihood of claiming the insurance, depending on the other factors listed above.
While assessing the risk, they develop a thing called an Actuarial Table that’s transferred to the underwriting department of an insurance company, that uses the given data in the table to finalize the premium amounts that you need to pay.
How Can You Lower Your Premiums?
Premium amount is entirely dependent on your risk assessment, backed by various parameters. A higher risk means more costly premiums. However, there are still a lot of ways to reduce your payable amounts using some nifty tricks.
If you have purchased several insurance policies for both your materialistic assets and life, that too from the same provider, you can certainly get a good discount on your overall premium amounts if you ask for it from the company.
Additionally, as you may already know, decreasing your coverage will immediately drop your premium amount. However, you must determine your current situation and the probability of using the policy before you make any changes in the deductible or coverage.
There are a lot of other methods as well for reducing your premium costs, but they’re dependent more on your determination and commitment. For instance, by not smoking, you can reduce your premium amount by up to 50%.
The Takeaway
When you purchase term insurance, the first thing that may come to your mind is the payable premiums. Whether you wish to reduce your premiums or not, it’s definitely worth rounding off an estimate to make better decisions.
With the above-shared tips, you can easily calculate the term insurance premium that you’re likely to pay to the insurer for your coverage. If you don’t want to be involved in manual work, you can use a calculator to calculate term insurance premium to estimate your insurance needs along with other tools available online.