Life Insurance Calculator: Figure Out How Much Life Insurance You Need

Because of the ongoing pandemic, it has become crystal clear to one, and all that life insurance is indeed the need of the hour. It is important that we make this financial decision as soon as possible, especially if you are the sole earning member of your family. However, when it comes to life insurance policies, the primary question often is figuring out how much life insurance you will need. 

An ideal way to answer this question would be by simply calculating how much money your loved ones would need to meet immediate needs and future obligations, and then calculate the assets in your family, accumulated savings, ongoing income etc. You can subtract the latter from the former, and the answer would be the minimum amount that you would ideally need to cover with a life insurance policy. A life insurance calculator can help you calculate the premium you need to pay for this desired cover in the most effective and hassle-free manner. 

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Why Use A Life Insurance Calculator And How Can You Benefit From It?

With the help of an insurance calculator, you can make hassle-free calculations. What’s more? You can even compare premiums from different life insurance policy providers and pick the right policy and an insurance company. Here is how you can use a life insurance calculator to calculate your premiums:

#1. Pick a life insurance policy and visit that insurance company’s website. Most companies have their own updated insurance calculators on their sites and mobile applications. 

#2. Enter your details like age, gender, your annual income, and other basic fields

#3. Now, select the desired sum assured on the life insurance calculator for a specific tenure

#4. Next, you can choose to add on any riders available for the policy of your choice

#5. The life insurance calculator will instantly show you the amount you have to pay as a premium, based on your inputs. 

In lieu of the current pandemic, it is important that every individual research questions like, what is insurance all about and why is it necessary to have at least one policy! Consult an advisor to know what cover would be ideal for your family and how to calculate your premiums accordingly. 

How To Estimate Your Life Insurance Coverage Amount?

When purchasing a life insurance policy, the part where you must decide on the coverage amount is the most crucial of them all. Although there is no such thumb rule that can help you decide your coverage amount, here are a few factors that can help you come to a more accurate conclusion: 

#1. If you have more young people in your family, then you should opt for coverage that is at least ten times your gross income.

#2. Do a quick valuation of all your assets, ongoing income, savings, family’s assets and have a quick net value figure in hand. 

#3. Next, calculate all the ongoing, urgent, or immediate and future financial obligations your family members will have in your absence and make a rough estimate of that amount. The difference between these two figures should ideally be your coverage amount. 

#4. Keep a separate list of all the future goals that your family members will have to fulfil, like marriage, buying a house etc. 

#5. Don’t forget to factor in the inflation rate and predicted rise in your earnings over the years

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Remember, the amount your family receives from a life insurance policy can help them finance a pending mortgage, outstanding loans, credit card dues and many other financial obligations that they may be facing. Apart from these, you can also ensure that your family is not suddenly burdened with financial troubles while they are already grieving a loss.

Term insurance policies are the simplest forms of life insurance plans that pay out the sum assured to the family of the insured if the insured dies during the term of the policy. However, if the person insured survives the policy term, then there is no payout for the same. 

Another major advantage a salaried person must keep in mind while estimate the life insurance cover they need, is the tax deduction offered against their premiums under Section 80C of the 1961 Income Tax Act. According to the latest update, the old tax regime allows a deduction of up to Rs. 1,50,000 (total of all payments and/or investments from this section), including premiums against your life insurance policy, provided that the yearly premiums do not exceed 10% of the sum assured to the policyholder. 

Make it a point always to use a life insurance calculator to ensure that your premium amount does not exceed the limit, and you can claim a tax deduction at ease. Ensure that you do your due diligence on insurance, consult an expert ad pick a policy that will cover your family and support them in your absence.