A term plan calculator is a free online tool crucial for estimating how much life insurance coverage you need to protect your loved ones financially. The tool also calculates the premium associated with your term insurance life cover^#. The term insurance calculator enables you to plan for your family’s future financial security by taking into consideration various factors. The final premium for your policy may also vary from the calculated premium depending on medical examination, family health history and many more.

In this article, we will break down the key factors used in calculating term insurance premium, so you have the necessary information to make informed decisions about your life insurance needs.

Factors that determine the premium rate of the term insurance policy

Below are eight key factors that can determine the premium for a term insurance policy.

Age and Gender

Your age and gender directly impact the premium for your term insurance plan. Younger individuals are usually healthy and pay a lower premium as they are considered low risk. In contrast, older individuals are likely to pay a higher premium as they are more prone to health issues. Additionally, gender can impact rates, with some policies offering different premiums for males and females. Women generally tend to live longer than men and have a lower premium than men.

Health and Lifestyle choices

Your lifestyle choices affect your health, and the state of your health influences the premium rates. Certain lifestyle choices, like smoking and drinking, can deteriorate your health and result in a higher premium. Conversely, habits like engaging in regular physical activity help maintain good health and often lead to lower premiums.

Coverage amount

The desired coverage amount, or the sum assured, directly affects the premium. Sum assured is a function of income and age. A higher sum assured generally results in higher premiums, as it reflects an increased financial risk for the insurance company. On the contrary, a lower sum assured can be bought at a relatively lower premium as the associated risk is lowered for the insurer.

Policy term length

The duration of your insurance policy is known as the policy term length. A longer policy tenure increases the value of the premium as the insurance company protects the financial interests of your loved ones for a longer duration. It is essential to understand that while longer terms may have a higher premium, they offer extended coverage and help financially safeguard your family.

Occupation and Hobbies

Certain occupations and hobbies carry high levels of risk. For instance, riskier professions, such as construction, defence forces, mining and others, can pose a threat to your well-being. Likewise, some hobbies like adventure activities, such as sky diving and paragliding, can be dangerous. These factors may lead to higher premiums due to the increased likelihood of potential claims.

Medical test results

Life insurance companies ask you to undergo a medical test before purchasing a term insurance plan. This is done to ascertain your health status. The results of this medical test directly influence the premium for your plan. Better health results often translate to lower premiums as estimated by the term insurance calculator, whereas poor results can increase the term insurance premium.

Location and Residency

Your place of residence can affect living costs. Urban areas are costlier than rural ones. Your residence also potentially exposes you to regional health risks. For example, people living in highly polluted cities are more likely to fall sick compared to people living in rural areas with better air quality. As a result, urban and high-cost regions may have a higher premium compared to rural areas.

Family health history

Insurance companies may consider the health history of your immediate family members when assessing risk. A family history of certain illnesses, such as cancer, heart ailments, kidney issues and more, could increase your premium rates.

Conclusion

The term plan calculator serves as a valuable tool that takes into account crucial elements to calculate your premium. Understanding these factors empowers you to make informed decisions and ensures that your insurance coverage and premium rates align with your specific needs and circumstances.