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Term Insurance Calculator

Every applicant, especially if buying health insurance, or life insurance is a fiscal risk to insurance companies concerning various factors that determine the applicant's eligibility. Especially so with term plans that are sold online. In this case, without the involvement of an agent to corroborate to the details furnished by the applicant, insurance companies employ the use of a Term Insurance calculator or a term plan premium calculator to maintain transparency between the insured and the company in good faith.

Every insurance company has its plan calculator based on calculations designed by experienced policymakers. Given that this article strictly adheres to term plans, in this segment, we shall talk about ingenious term plan premium calculators and their role in deciding everything from premiums to tenure in one click.

What are term insurance calculators?

The term plan premium calculator, as it is also known as, is an algorithm-based "calculator" that helps a potential buyer determine the actual premium he/she has to pay towards a policy based on certain parameters. Given that most of the insurance companies have streamlined their sales process by enabling customers to buy policies online, the premium calculator comes in handy as it allows you to view multiple options in a single click. With customization options not limited to allowing the applicant to go with the sum assured limit of his choosing, this tool eases a lord of hardships previously faced. Let's take a more in-depth look into the features, benefits, and the primary working mechanism that makes the term plan calculator a buyer-friendly option.

Key features of term insurance calculators

Term insurance calculators are a super quick way of flitting in and out of hundreds of plans based on what you are looking for. Some of the key features offered by these calculators are

  • Personalized quotes

    Term insurance calculators are not generic. They utilize data entered by the applicant and provide real-time results based on various factors like age, lifestyle choices, premium payment frequency, the sum assured, and tenure

  • Ease of use

    Anyone can use this tool with ease. What makes it such a user-friendly feature is that it does not pose unanswerable demands, hence checking every box in the list of why you should use term insurance calculators list

  • Customization

    The term customization in this context is in regards to changes that a buyer can make. This pertains to choices he/she makes that define the type of plan he/she looks for. Tenure length, the sum assured, premium payment modes, and the addition of riders are some of the fields that an applicant can tweak to optimize the results closer to his/her requirements

Benefits of term insurance calculators

  • Cost-effective

    The one thing that does not cost a buyer vast amounts of time, and helps save costs by cutting out intermediaries is a policy purchased online. Insurance companies offer discounts on purchases made online, so once the term insurance calculator quotes out the best policies based on a particular buyer's interests, he/she can make a detailed comparison between plans, weigh pros and cons, and proceed to buy a policy in his/her best interests

  • One-stop comparison

    The term plan premium calculator is the only tool in India that is designed to provide multiple options from multiple sellers under the same roof. This saves up a lot of time when trying to opt for the best plan out there

  • Efficient

    Because policies do not require submission of hard copies and other menial time-consuming processes, term plan premium calculators offer streamlined options within minutes, one of which the buyer can go ahead with without bargaining with an agent, hence effectively cutting out middlemen and also saving up a lot of time

  • Reliable

    Term plan premium calculators are algorithm-driven and are purely based on the data furnished by the buyer. Given that there is no human intervention, the possibility of errors is eliminated. This, of course, relies on the buyer's honesty

  • Saves on back and forth trips

    Everyone, at some point in life, has had to run around gathering quotations from multiple insurance companies. However, with the advent of the term plan premium calculator, one can simply go online and get quotes from numerous companies in a single click without breaking a sweat

Making prudent use of the term insurance calculator not only saves a lot of time for the buyer, but it also sets a bracket on the parameters, hence enabling the buyer to bypass the "wild guess" part from the policy choosing segment.

Types of calculators

Albeit customized for every type of insurance, there are term plans that fall into a broader category of life insurance policies.  Here is a list of the types of calculators that pertain to term plans.

  • Term plan premium calculator or term insurance calculator

    Term plans, as the name suggests, provide a life cover to the insured for a specific period decided by both parties, i.e., the buyer and the point of inception. And because It is the simplest and most straightforward of insurances, there is, the term plan calculators employed for term plans calculate risk factors by running through the applicant's credentials revolving around the applicant's age, lifestyle choices, and sum assured asked for.

  • Investment calculator

    Investment calculator, although based on different parameters, allows the investor to gauge the returns he/she is entitled to between two dates. The investment calculator also unveils a comparison analysis for the investor to compare his/her fiscal engagements against other funds to check how well his/her investment is doing.

  • Retirement/Pension plan calculators

    As the name suggests, a pension plan calculator focuses more on the corpus accumulated at maturity. Pension plan calculators quote the corpus a buyer would require after his/her retirement to continue enjoying his/her current lifestyle, if not better.

    Savings plan calculators and retirement plan calculators operate on the same lines of accumulating a corpus for the later stages of one's life.

  • Applying for a term insurance plan online

    A majority of term plans are online plans, which eliminates a lot of unnecessary procedures. The process of applying for a term plan online is pretty much the same for every company across the policymakers' world. Here is a step-by-step generic online application process.

    • Once you have zeroed in on your choice in plan and provider, visit the official website
    • You should find term plans on the home page right away. In case you don't see term plans as a separate option, these should ideally be under the life insurance tab

The next option should the term plan insurance calculator. A majority of the insurance companies that offer term plans have the term plan premium calculators to provide the buyers with a one-stop solution to their insurance needs. These tools exist to eliminate a chunk of redundant and time-consuming processes. What term insurance does is check your eligibility for a specific plan. Once you enter the necessary details into the required fields, the term plan insurance calculator will generate a quote based on the details entered by you.

Why should one use term insurance calculators?

Without basic research at least on all term plans offered by every insurance company in the country, it would be a moot point attempting to "compare" an incomplete list. The introduction or term insurance calculators eradicated this drawback. Any buyer who wishes to enter into a binding contract deserves to know if there were better choices.

Here are some reasons why one should use these tools.

  • They are meant for buyers: There is a reason why certain tools are provided by service providers. In this case, companies want to provide the highest levels of hassle-free processes. User-friendly and easy to use, if it is provided, make use of it
  • Streamlined procedure: If you have one tool to reduce ten days' worth of manual work, it is best to check it out, if not put to good use. The majority of the term insurance calculators provided by insurance companies are straightforward and offer a streamlined, step-by-step process. No bypassing or setbacks are owing to the simplistic design of these calculators
  • Find your policy: The comparisons make all the difference in the world. Once the buyer is evident on the pros and cons of a bunch of tailor-made policies, choosing the best one is a cakewalk
  • Planning your finances: The applicant can plan his monthly finances on the spot thanks to these calculators. This also helps him/her define a structure for their budget, hence improving their money-management skills

Making prudent use of the term insurance calculator not only saves a lot of time for the buyer, but it also sets a bracket on the parameters, hence enabling the buyer to bypass the "wild guess" part of policy choices.

Using term plan insurance calculators

Using a term insurance calculator is pretty straightforward and should take about 5-7 minutes, depending on the buyer's needs. Most online calculators are based around the same base structure. Here are three easy steps of using a term plan insurance calculator based on generic processes every calculator offers.

  • Step A: Most calculators have the personal information page as the initial page. The buyer is to fill in relevant fields containing and not limited to the following
    1: Date of birth
    2: Gender
    3: Marital status
    4: Annual take-home salary
    5: Children (If any, with number of children)
    6: Life cover expected.
    Most term insurance calculators would ask you about your smoking habits on the first page.
  • Step B: This is where the actual sum assured amount the tenure expected is to be entered by the buyer. The term plan premium calculator will also ask the buyer to specify his/her payout preference, usually only one of two – Lump Sum or staggered monthly payments. Once these details have been furnished, all one needs to do is hit the calculate button and wait for the term insurance calculator to do its job.
  • Step C: The term insurance calculator returns a pool of optimized options based on the information fed into the calculator by the buyer. Based on these results, the buyer can compare plans and choose the one that comes closest to hitting every point In his/her checklist.

    This, if followed to the T, should give the buyer the entire list of choices revolving around his/her demands.

    Let's take a look at an example of a policy bought online with the gross premium and sum assured decided by a term plan insurance calculator. This is kept assuming the buyer was aware of his needs and budget.

    Details entered on the term plan premium calculator:

    1: Name of applicant: Mr X
    2: Date of birth: 24 April 1992
    3: Gender: Male
    4: Occupation: Other (Film)
    5: Marital status: Unmarried
    6: Previous history of illness: None
    7: Do you smoke: No

    What the term insurance calculator derives from this is the following data is that the applicant is a male, aged 27 years, with no previous history of illness and does not smoke.

Factors term insurance calculators are subject to

Term plan premium calculators are super-efficient because they have been programmed to consider a variety of factors, most of which they source from the details furnished by the buyer. Most of these calculations revolve around the factors below:

  • Age of the applicant: The age of the applicant, in most cases, falls under a wide bracket permitted for term plans. It is also logical to assume a young person in his/her 30s is less likely to fall ill compared to someone in their 50s
  • Plan type
  • Premium frequency: Many policies offer flexible payment methods
  • Sum assured demanded
  • Gender
  • Tenure chosen: Tenure plays an important role in premiums. The longer a buyer sticks with a plan, the additional risk is absorbed by the insurance company
  • Riders (If any): The addition of riders will obviously up the premiums. However, the comparison of a term plan premium calculator quotes presents alternatives without having to compromise on the budget
  • Smoking: This is a mandated check-in EVERY term insurance calculator. Smokers make for extremely risky applicants, and calculators quote policies accordingly, keeping risk factors in mind

In some cases, the occupation is also important. High-risk occupations like shipping, mining are considered more dangerous than office-based jobs and might result in varying premiums. However, term plan premium calculators take in a lot of other factors to zero in on the most suitable policy.

Taking the example of Mr X forward, we now know that Mr X is a healthy 27-year-old. Because he has no history of illness and does not smoke, he makes for an ideal candidate.

After the term insurance calculator has concatenated this information provided by the applicant, this is what the following data reads as- Male, aged 27 years, with no previous history of illness and does not smoke.

Based on this, the calculator presents a comparison for all plans he is eligible for. The basic sum assured is set at 65,00,000, which is the applicant's salary X 10. The policy he has chosen gives him a 50% off in the first year, cutting down an initial annual premium set at 15000 INR to 7000 INR for the first year.

Mr X decides not to choose any additional benefits and is okay with the sum assured offered.
After processing, his policy kit generated based on the term insurance calculator looks like this:

  • Name of applicant: Mr X
  • Policy number: jkakkak8839
  • Status: Active
  • TERM: 10 years
  • Payment mode: Monthly
  • Premium amount: Rs. 641
  • Accidental death additional cost: Rs. 0
  • Critical illness additional cost: Rs 0
  • Terminal illness additional cost: Rs. 0
  • Disability waiver: N/A.

Term plan premium: Who decides them?

The term plan premiums calculated online are determined by the term plan premium calculators.  They, however, are designed and set by a set of financial wizards known as actuaries. The premiums offered by term plan calculators are based, as we now know, on data provided by an applicant. However, the premiums set by actuaries before they can be curated and calculated by the calculators are based on the following factors:

  • Mortality rate

    In simple words, the mortality rate for an insurance company is the company's anticipation of death in a pool of people of the same age exposed to the same conditions as the policyholder

  • Earnings through investment

    Because no company can report a 100% mortality rate, it is highly unlikely that all policies will convert to payouts. Hence, the funds accumulated in this pool of policyholders are invested by insurance companies. This is one of the reasons why the term plans are cheap

  • Expenses

    A term plan's premium is composed of two parts, the net premium, and the administration charges. The net premium depends on the mortality rate and the earning scope through investments, while the administration charges are what a company charges as its operating charges

As simple as the premiums calculated by term insurance calculators look, the factors that go into the making of the perfect quote are almost encyclopedic.

 

  • Age on Entry

    Directly linked to the age of an applicant, the term insurance calculator sources this from the date of birth provided by the applicant

  • Tenure

    The tenure of a plan is directly proportional to the increase in risk. However, it also displays loyalty to the company. A term plan premium calculator uses this in combination with the age of the applicant and quotes the most appropriate policies. Every company has a different tenure, pros, and cons withstanding

  • Additional benefits

    Usually available in the form of riders, these give the applicant a chance to cover himself/herself against every possible harm. Calculators use this information and, from a pool of similar or close to related policies, present the most viable of choices

  • Sum assured

    The sum assured that is presented by a calculator is more or less based on the formula

(Annual Salary X 10) + Expenses+debt+loans-(dispensable assets.)

A buyer can ask for a higher sum assured. The premiums calculated will consider this as well.

Comparing plans

Now, the important question after all this journey through the world of life insurance is what to look for in a comparison of plans. Some websites will give an overview of all term policies a buyer is eligible for, with the most probable premiums calculated based on the basic details provided by him/her, the buyer's age, an overview of his/her lifestyle habits, and the expected sum assured.

Let us consider an example before we move ahead with an in-detail discussion on how to compare plans.

Mr.X, a potential buyer, is looking for a basic sum assured of 2 crores without any additional riders Mr X does not smoke and is between 25 and 28 years of age. He uses a term plan calculator for generating an optimized quote, and after mulling over the list of offers unveiled by the term insurance calculator, Mr X picks the top three policies catering to his needs.

Features Policy A Policy B Policy C
Sum assured 2 crores 2 crores 2 crores
Critical illness disease In-built Rider In-built
Accidental Death benefit No In-built Rider
Disability premium Waiver Free Rider Rider
Tax benefits 80C 80C and 10(10D) 80C and 10(10D)
Policy term (min-max) 5 – 35 5 – 40 5 – 45
Total calculated premium 1055 1051 1142

This comparison gives us Mr.X is eligible for. All these plans have their pros and cons.

  • Policy A gives Mr.X most of what he is looking for a premium of 1055 INR. This plan, however, does not have an accidental death benefit.  The premium is within budget, and the buyer gets an in-built critical illness disease and the disability waiver benefit for free on an offer from the Insurance company.
  • Policy B offers both critical illness benefits and disability benefits in the form of a rider, which he has not chosen yet. Once he does, the premium is likely to go upwards of the base 1051 INR.
  • Policy C offers the accidental death benefit and the disability benefit as a rider, hence driving the premium upwards of 1142 INR.

However, weighing the pros and cons, Mr X goes with Policy B because he is not obliged to buy both of the riders. He chooses to go with the disability premium waiver rider because he already has the accidental death benefit as an in-built feature, which means he is not to buy this rider as a separate purchase. The buyer then pays his first instalment of 1422 INR, getting the third rider free for the first six months on an offer proposed by the company. Mr.X has the choice of either availing the rider as at an additional cost after six months or can drop it.

This was an example to show how necessary comparisons work. What you should look for in a comparison chart is the features, added benefits, the sum assured to premium ratio, and the tenure 

Best term plan premium calculators

Every company has its tweaks beyond the uniting factors most of these calculators work on. Beyond the usual factors, other factors include

  • Mortality rate: Every company has different anticipation of death, which is considered by actuaries while designing premiums for a term plan
  • Administration charges: Just like mortality rates, every company has different administration charges that are added to the gross premium paid by the buyer

However, a list of the top ten companies dealing in term plans should give you an idea of which term plan calculators work for you. It should be noted that this list is curated based on a company's performance and its claim settlement ratio (in simple word, the Claim settlement ratio or the CSR is defined as the total number of claims settled against the number of claims received by that particular company in one year).

can be curated and calculated by the calculators are based on the following factors:

  • LIC India

    The biggest name in the field on insurance in India and the only company in this list to have received close to a whopping 7+ lakh claims, LIC boasts of claims pending ratio of 0.5%. LIC has a term plan product. Term Plan: E-Term

  • ICICI Prudential Life Insurance

    Another big name in the insurance world, ICICI, boasts of a claim settlement ratio of 98.6% with only 0.80 in pending claims. Term Plan: iTerm

  • SBI Life Insurance

    India's second Government sector entry in this list, SBI, has enjoyed its run, claiming the 3rd spot here with a claim settlement ratio of 96.80% Term plans: eShield and eShield Plus.

  • HDFC Standard Life Insurance

    One of the most diverse establishments in the country, HDFC, has an excellent track record with its loyal customers. Term Plan: Click 2 Protect 3D

  • Max Life Insurance

    A relatively new entry in the list, this does not dampen the company's performance culminating in a 98.70% settlement ratio. Term Plans: Online Term Plan Plus.

  • Bajaj Allianz Life Insurance

    Bajaj's entry into the list of affordable term plans comes as one of the reasonable plans in terms of value for money with a solid 95% claim settlement ratio. Term plan: eTouch Online

  • Birla Sun Life Insurance

    Birla sun life is renowned for its quality of service in India and wraps up the show with a 97.10% settlement ratio. Term Plan: Easy Protect Plan

  • Reliance Nippon Life Insurance

    A venture by reliance and the insurance counterpart Nippon, the company has recorded a sweet 97,71% in closed settlements. Term Plan: Life Protect Plus

  • TATA AIA Life Insurance

    One of the oldest establishments, TATA AIA and it's motor insurance counterpart TATA AIG has, for long, providing quality products and holds to its claim settlement ratio of an unbeatable 99.10%. Term Plan: Sampoorna Raksha

  • PNB Metlife India Insurance

    Metlife has, for decades, been one of the best insurance companies in the world. In a conglomeration with PNB in India, the company presents a claim settlement ratio of 96..20 %. Term Plan: Mera Term Plan

Please note that this is not to be compared to the Best term plans in India segment. This list is based purely on claim settlement ratio for term plans and how different companies employ the use of term plan premium calculators depending on different factors as well. However, it is always advisable for a buyer to keep a company's claim settlement ratio while choosing a plan.

Do's and Don'ts

As with every commodity in the world, term plan insurance calculators have their own set of do's and don'ts.

  • DO NOT LIE: It might sound childish, but the repercussions of lying on your term plan application will lead to a rise in premiums once the data is verified and discrepancies are found
  • DO make prudent use of the term insurance calculator
  • DO NOT withhold information
  • DO mention if you are a smoker/tobacco user or have done it in the last 12 months. As specific as this is, smoking a huge risk factor and is viewed as a liability in terms of lifestyle choices. If you hide this fact and it is later found to be the opposite, the insurance can be declared NULL and VOID. That is how seriously insurance companies take smoking habits
  • DO NOT jump to conclusions. Take your time, go through the comparisons presented by the calculator, and decide on the one that comes closest to fulfilling your needs
  • DO read between the lines. Quite literally, read offer documents carefully before investing.

Term Insurance Calculator - FAQ

  • Q: What tenure should I go for?

    Ans: Plan your tenure in such a way to create a backup plan for your family in case of sudden misfortune. It will, at this point, be in the best interest to choose a tenure that will act as a replacement. It is always advisable to read the offer document carefully before deciding a tenure that will help your family after your demise.
  • Q: How does a premium calculator help in deciding premiums?

    Ans: You may notice a slight variation in the premium quoted by the term insurance calculator from the final premium amount charged. The factors that the calculator takes into account are age, gender, medical history, occupation, lifestyle choices, etc. Some charges like the admin charges are added on later.
  • Q: What is the sum assured I can go for?

    Ans: It all depends on your financial value. Remember, the term plan is a financial plug for your family in the case of your untimely demise. It depends on factors like your lifestyle, expenditure, shared resources, in case you the sole breadwinner of the family, expenses including future planning like children's education. However, do not get carried away, as asking for a considerable sum assured also means a steep increase in premiums. However, this might not be the case with every applicant. If the applicant is young (making him less susceptible to illness and major diseases) with no history of illness, he/ she can choose a sum assured they feel will not leave behind a financial hole in his/her absence.
  • Q: What maturity benefit can I expect from a term plan?

    Ans: Term plans are pure death benefit plans, meaning these plans cover life for an insured to be paid out in case of demise due to and limited to natural or accidental death, death due to critical illnesses, and death due to terminal diseases. Because these are pure death benefits, you won't be qualifying any maturity benefits
  • Q: Can I add members to my existing term plan?

    Ans: No. You need to get individual term plans for each member you want to get insured. However, given that term plans cost you the same amount as a dinner out with your family, you can get members of your family insured too, although term plans are perfect for adults. In the case of children, it would be better to enrol them in a children's savings plan. A term plan can later be added to the child's name once you or they feel the need for it.
  • Q: Can I increase the tenure of my policy?

    Ans: No. An issued policy cannot be modified to accommodate requests like tenure extensions. If you feel you would need an extension, the policymakers, though not very often, float out such offers like extensions of policies and tenures. If not, you can always go for a policy with a higher tenure. But you need to be spot on with the timing to minimize risk factors and, in effect, increased premiums.
  • Q: How is life insurance cost calculated?

    Ans: Life insurance costs are based on various risk factors like age, gender, and lifestyle. These risks are analyzed by revisiting analytical models, trends throughout history, and changes in generation behaviours. Every era will have a new life expectancy and a mortality rate. Based on crowd behaviours, policies may change their calculations and hence having an impact, positive or negative, in insurance costs.
  • Q: How is the sum assured calculated in a term plan?

    Ans: The sum assured in a term plan is a collective summary of your current expenses or financial liabilities combined with your salary*10 (this is the default calculation). However, insurance companies do not put a cap on this, and an applicant is free to choose his/her sum assured based on his/her current financial state or structure.
  • Q: How to calculate the claim amount?

    Ans: A claim amount, or the payout, is the amount payable to the beneficiary. Now, because term plans are pure death benefits, the sum assured is paid out with tax benefits under section 80C of the Income Tax Act. It is not possible to calculate the payout for other policies beforehand, unfortunately, due to deductibles and corpus generation being involved in investment-cum-insurance types of plans.
  • Q: How to calculate life insurance cover?

    Ans: One can easily use a term plan premium calculator to calculate his/her life cover by keeping the following points in mind beforehand.
    • Add up your financial expenses and liabilities
    • Deduct dispensable assets from this amount
    • Add any expenses you foresee in the future. These might include events like a marriage, higher education, etc. that you want to see fulfilled even in your absence.
    This will be added to your generated sum assured that is a mandate ten times your annual salary.
Written By: Paisawiki - Updated: 09 September 2020
Disclaimer: Paisawiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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