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Life insurance is a contract between an insurance company and an individual who wishes to impact someone else's financial well-being. Policyholders make contributions called premiums which the insurance company pools to pay death benefits when various policyholders die.

The plan compensates for the economic consequences which hit the dependents after someone's demise. A life insurance calculator is useful when determining the amount of coverage you'll require.

The calculator considers your situation and computes a custom quote which suits your needs. It guides you not to overpay or to buy less than you should.


Why use a life insurance calculator?

The traditional way of calculating the premiums for a life insurance policy involved discussing your financial matters with an expert.

You would sum up your income, current debts, and monthly expenses and multiply that with the years you wanted to support your beneficiaries.

Then you would subtract your current assets, any other life insurance policies you had, and any assets expected in the future.

That was a lot of work.

Get Unbaised Advice

A life insurance calculator simplifies the task significantly and gives you unbiased advice to help you save money. It prompts you to key in a few details, and it does the math for you.

The program considers several dynamics before working out the amount of money matching the targeted death benefit. It figures the sum your family would need to maintain their current living standard after paying for the expenses for your death.

Are there different types of life insurance?

Yes, and selecting the type of life insurance to buy can be puzzling at times. Nevertheless, it is a critical step since the decision you make binds you to a long-term commitment.

There are two choices to make.

1. Term Life Insurance

When you need life insurance for a certain number of years, term life insurance is the way to go.

The insurance carrier conditions the policy based on the likelihood that the policyholder will die within a given period. It is the most affordable and widely accepted type of life insurance.

Who Is It Suitable For?

Term life insurance is suitable if there is an impending need for a lump sum in the future. For instance, the death benefit could pay for your children's college fees or help them to invest.

Typically, your beneficiaries can only file a claim if you die within the term of the policy. The contract lapses with no death benefit if the period elapses while you are still alive.

You can either renew the policy or buy a new one, but it becomes cost-prohibitive in some cases.

2. Permanent Life Insurance

This option has no time limit.

The insured pays the agreed premiums for the rest of his or her life, and the death benefit is guaranteed. It employs some business dynamics where your contributions generate revenue for the insurance company.

The reason for investing the premiums paid is to sustain the permanency of your life insurance. At the end of the contract, your beneficiaries get a death benefit equal to the total premiums you paid plus interest.

What Are The Key Differences?

The premiums for permanent life insurance can be many times more than those of term life insurance. However, they don't change for as long as you live.

The premiums for term life insurance can rise significantly with each renewal.

What affects your life insurance premiums?

There are four contributing factors to the cost of life insurance premiums.

  • Age - Life insurance is cheaper for younger people. The premium for term life insurance may increase by 8% or more per year.
  • Health Status - Health complications and unhealthy lifestyle make life insurance more costly.
  • Size of Death Benefit - The higher the death benefit payout, the more expensive the premiums.
  • The Policy Term - An extended policy term costs more than a shorter one.

Steps to follow when buying a life insurance policy

If you're shopping for your policy, there are essential steps you need to consider to get the right plan. Read below:

1. Evaluate How Much Insurance You Should Buy

The purpose of life insurance is to give your dependents a fulfilling life after you die.

You don't want your spouse and kids to struggle with the cost of living.

Firstly, calculate your expenses and make future projections. Factor any debts you have and approximate the cost of education for your kids among other costs.

To make life easier, you can use our Life Insurance Calculator to determine this figure.

2. Get a Quote

Shop around for life insurance companies and get a quote from each. See if there is life insurance calculator on their websites and use it to get a price estimate.

You will need to provide your personal information like age, gender, location, and brief medical history. Once you have the quotes, compare them and pursue the carriers with the fairest and most reasonable deal.

3. Apply

Consult with the company on their application requirements and supply them. Your application can be much easier if you prepare the documents in advance. You will have to prove your identity, citizenship, right of residence, and age.

You will also have to present evidence of income. You can use a tax return, letter of employment, pay slips, or whatever the insurer advises. Your company or broker should guide you through the process.

4. Have a Medical Examination

Life insurance companies are keen on the applicant's health status. You will have to provide a medical report, so be ready for the examination.

5. Wait for Underwriting

The insurance company's underwriter will be performing a risk assessment on you as you wait for approval. The process involves counterchecking your medical report against what you provided. The company may scrutinize your medical history and health habits for as many as seven years.

6. Sign and Pay

Once underwriting is over, your life insurance policy is ready. You'll need to confirm the details, sign it, and make your first payment.

Final thoughts? Wrapping up.

A life insurance policy does not equate a person's worth to monetary value.

Its purpose is to help your loved ones to lead a decent life after your death. It shields your family members from suffering once your contribution to their welfare stops.

In the event of unexpected death, a life insurance policy can clear the expenses for your funeral and leave your family financially stable. It also gives the breadwinner peace of mind knowing that the family has a financial backup.

Sometimes people exaggerate life insurance. It's often not as expensive as believed.

Estimate your insurance needs easily with the aid of a life insurance calculator, so you know the amount of coverage to look for.

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