When buying a life insurance, the very first question that arises in mind is, “How much amount should be invested for life insurance?” The question is quite simple to ask but very difficult to answer. Yet, it has to be somehow answered. When buying a life insurance, the lump sum amount invested goes to the legal heirs when the person dies. In this way the future of the dependents can be secured. This amount is referred as death benefit, face value, coverage or proceeds. However, the security of the dependents entirely depends upon coverage chosen.
The coverage amount can’t be chosen randomly. One needs to give a wise contemplation over the issue. If the chosen amount is more than required, money can be wasted if life insurance is not for the whole life. In many case life insurance rarely get converted into benefits as people generally live beyond their life insurance terms and fail to get any benefit. Obviously choosing the amount less than required amount would put the life of the dependents in trouble. Generally, people randomly make their life insurance calculations and are either under-insured or over-insured.
For solving such a problem life insurance companies have come up with Do-It-Yourself (DIY) tools. Such life insurance premium calculator helps in calculating the coverage methodically instead of choosing it randomly. In today’s age of digitalization these tools are accessible online for calculating the right coverage.
The Working of the Life Insurance Calculator
A number of life insurance calculators are available on the internet and can be easily accessed. These calculators to a great extent have eliminated the need of financial experts for calculating the life insurance amount. These calculators put several questions. The person simply has to give rough idea about the amount needed by the dependents for different purposes after his/her death. The tool calculates the sum which can be chosen for the life insurance coverage. It is very simple to use. However, it is important to note here that all the calculators don’t work in the same way, hence referring multiple calculators will be beneficial.
How to use a life insurance calculator?
There are three easy steps which hardly take 10 minute. These steps are as follows:
- Filling personal details like age, gender, marital status, number of dependent children, smoking habits, health status, life cover, annual income, etc.
- Filling the assured amount and desirable term. Along with it, one has to fill with lump sum amount or monthly income is desired.
- The calculator will suggest various term plans suitable for the person, and one as per the choice can be selected from it.
7 benefits of life insurance calculator
- The very first benefit is that life insurance premium calculator is available free of cost. Numerous life insurance calculators can be easily accessed at the click of the mouse.
- The second benefit is that more than single calculator can be used if desired. Though the working of calculators is more or less same, yet, they are not entirely same. So checking and rechecking the coverage calculation helps in making an intelligent choice.
- The third benefit is that these calculators are carefully designed and programmed by the experts, so the chance of making mistake is almost negligible.
- The fourth benefit is that these can be easily accessed from anywhere at any time. One can make the calculations while sitting in the comforts of home.
- The fifth benefit is that it helps in keeping personal information confidential as need not be disclosed to anyone.
- The sixth benefit is that there is no obligation attached with these tools. The tools are never attached with a request for buying a product.
- The seventh benefit of these calculators is that these educate the people. The people get valuable tips, and direction to take right decision.
The Features of Best Insurance Calculators
Broadly speaking the best life insurance premium calculator are those which help people to make the right choice. In general the tools which are considered best take into various personal factors such as:
- Auto loan
- Real state payment
- Other liabilities
- Other expenses
- College funding
- Education expenses
- Assets belonging to family through investment
- Legacy/Charity Issue
- Current life insurance policies
- Cash/other investment
- Business/Real estate
- State and income tax rate
- Rate of Inflation
- Return of premium
- Outstanding mortgage
- Outstanding debts besides mortgage
- Current savings excluding retirement fund
- Desired earnings replacement
- Partner’s age and profession
- Estimated expenditures if partner keeps on working after the death of the person
- Partner’s annual income, duration of work and marginal tax rate
- Approximate annual living expense
- Estimated funeral expense
Hence, asking of various vital financial parameters helps in selecting the right coverage. It also helps in giving beneficial tips for making the right choice. However, for making the right move it is always to get the second opinion from a financial expert.