How Much Life Insurance Do You Need? It Depends on These Factors

Rakesh, an aspiring manager at 27, married, expecting their first kid. Everything went well until Rakesh met with a severe accident, and by the time people took him to the hospital, he died.

What about his wife and the child who is yet to arrive?

It is where life insurance comes into play. It acts as a safety net when your family needs it the most, and it is in your absence. But, apart from owning life insurance, one should also have the apt life cover to cover all the necessary and uninvited events.

This blog will help you in understanding,

• Who should own life insurance, and why should they?
• What are a life insurance calculator and its importance?
• What are the factors affecting life insurance policy purchases?

What is Life Insurance?

Life insurance is a contract between the policyholder and the insurer (insurance company). The latter commits to pay a set sum after the policyholder’s death. The payment made is known as the death benefit.

Now, the death benefit is paid to the beneficiary/nominee(s) based on the life insurance premiums paid by the insured.

Note: Life insurance benefits are just not limited to the death benefit. Instead, it is a comprehensive bunch.

Now, to understand life insurance a little bit more, there are two types of life insurance:

Whole Life Insurance: This type of life insurance is also known as the Straight Life Insurance Plan or the Ordinary Life Insurance Plan. As mentioned earlier, it is a comprehensive and inclusive package with a maturity age of 100 years. And, luckily if the policyholder sails through the maturity phase, then the insurance becomes a matured endowment.

Whole life insurance lasts until the policyholder continues to make the payment. Under this policy plan, the insurer can withdraw or lend against the coverage.
By any chance, if the insurer meets with an untimely death, the insurance company shall pay a lump sum to the beneficiary (listed by the policyholder).

Note: Whole life insurance plans can be synonymized as permanent life insurance, which implies the policyholder is insured for the rest of their life (as long as they pay their respective premium amount). Some life insurance plans offer an investment element to accumulate capital value by investing the premiums you spend in the market.

Perk: This plan’s death benefit is free from tax.

Term Life Insurance: It is one of the most preferred types of life insurance because it comes with a specific set of years and has an inclusive list that caters to audiences with different needs and requirements. It offers your family financial security at the most affordable rates. Moreover, it allows you to leverage a higher sum guaranteed at a low premium cost. In addition, some insurance companies enable you to extend your insurance cover after it has expired.

Note: The premiums would be low if you start investing in term insurance at a young earning age.

Who needs Life Insurance?

As the question suggests, life insurance is a complete package covering almost every event of your life; one can consider it an inclusive package. If I must say then, life insurance is a complete package that everyone must own, especially those who know they can’t have a safe financial float when confronted with monetary hurdles or emergencies.

And, if you are the sole bread-winner in the family or have a large debt that surpasses your assets, insurance assures that your family is adequately taken care of if you die.

If you have good economic surf, you can still consider purchasing a moderate life insurance cover that can be there in changing times of your pocket.

What is a Life Insurance Calculator?

A life insurance calculator is an efficient, helpful, and specially curated calculator that helps the potential policyholder to calculate the monthly/annual premium they are expected to pay to the insurance company. You can call it a blessing in disguise because they give the actual numbers to provide you with a better picture of your possible pocket cuts for premiums. It also proves to be an excellent tool for the insured as it also helps you calculate the sum assured.

Knowing the sum assured is crucial as it helps you to map whether the given numbers are sufficient to keep your family afloat or not.

Why Do You Need a Life Insurance Calculator?

After understanding the use and benefit of a life insurance calculator, let us know why one must use it before jumping in and purchasing the life insurance without understanding the premium effect on the pocket.

The necessary factors are as follows:

Saves Times: It would be time-consuming to manually sit and calculate the cost. Instead, using a term insurance premium calculator can help you save a lot of time.
There is no need to submit any official documents as you can leverage this tool online for free also. However, you need to fill in some necessary details, and within a couple of minutes, it will suggest the best type of plan you can buy.

Compare, Think, and Decide: Let me break it to you that the term insurance premium calculator is the only insurance-related tool that gives you the liberty to compare insurance plans from different insurance providers under a single umbrella. Therefore, when you compare and buy, it will turn out to be a beneficial deal because you can monitor multiple insurance plans under one roof.

With the help of a term plan premium calculator, you will extract an accurate estimate of how much premium you will have to pay in return for the coverage you want.

Accuracy: Do you think that you will be able to have clear and direct numbers telling how much the insurance plan will cost you and how much sum assured will you receive? It might be possible, but it will be time-consuming and not the correct number because human error is high. Here, people can use an insurance premium calculator to receive an accurate estimate of how much premium one has to pay in return for the coverage they want.

What are the Factors that Determine How Much Life Insurance will Cost?

There are certain things that the insurance calculator requires to chalk out the best insurance plan for you. And, the concerning factors are as follows:

Age: It is one of the primary elements determining a policyholder’s life insurance rates. The logical reason behind this is that a young earning person has a better possibility of keeping life insurance coverage for many years. Apart from that, there is a possibility that young blood is less likely to succumb to any age-related illness. Therefore, these elements qualify them for reduced rates.

Note: Financial experts always believe that it is best to purchase a life cover for your 20’s as they could benefit from low premiums.

Gender: It is a fact that women are expected to live at least five years longer than males. As it justifies that both genders have varying life expectancies, it is one reason that gender plays a role in life insurance premium calculators. It is a good perk for women. As a result, the premium one pays affected, causing them to pay the premium over a longer time but at a reduced cost.

Employment Type: Profession also plays a vital role because it’s ultimately your job that runs the household. Also, it has a high possibility to impact your premium.

Medical Check-Up: While applying for a life insurance cover, you must undergo a medical health check-up to review your medical records. Potential policyholders who are in good health and have decent lifestyle habits (rather than those who smoke and consume tobacco) usually have to pay less. However, if you have some medical issues, you may need to pay a higher premium for coverage.

However, the insurer has the authority to reject an insurance application if the candidate has a chronic or life-threatening health condition such as cancer, etc.

Smoking Habits: As we all know that smoking is injurious to health. Being a chain smoker is equivalent to digging your own grave to avail of insurance. Most smokers have to spend twice as much as non-smokers, significantly impacting the premium. Therefore, it’s better to quit and mend the paths rather than empty your pocket.

Policy Type: Life insurance is a broad umbrella that is a comprehensive and inclusive home of different types and their varying needs. Every life insurance type differs in terms of the policy term, maturity, premium amount, sum assured, and many more.

Medical History: Medical history is important because specific illness types follow hereditary traits such as – cancer, heart-related issues, and other severe illnesses. It is why a person’s premium rate is higher than if the insurance company finds any such problem in your gene pool.

Invest in Well-Rounded Protection For Your Entire Family

While getting life insurance is essential to protect your whole family from the risk of a sudden death or severe illness, it is also important to keep in mind that just taking out a life insurance policy might not be enough.

For better protection, consider investing in health and car insurance as well. And, since some insurance companies might deny legitimate claims, make sure to research and find a car or motorcycle accident attorney in advance to ensure that you’ll get the benefits you have been paying for in the event of an accident.

Conclusion

A life insurance premium is essential to get the best possible life insurance in the market. Apart from that, you can view and compare a cluster of insurances, choose what suits your pocket, and want to list the best. It also allows you to decide without involving any financial advisor in your personal life decisions.