Life Insurance Premium Calculator: 2015

Thursday, 31 December 2015

How to build financial solutions in Life?

Life insurance is smart way to help protect your family finances against any sort of financial crisis if anything unfortunate happens to you. It ensures your loved ones are able to maintain their standard of living and gives you an extra peace of mind. The market is already loaded with hundreds of insurance products which cater to your family security needs. You can get tailored products depending upon your requirements and mostly importantly your pockets.

However, such is the competition that while buying insurance products the major confusion that struck your mind is what should be the insurance cover that will financially secure your family? How much cover should I buy? Till what period I should buy the cover for? Will they be able to live the same lifestyle what they are currently living with? What will be the inflation rate in future? These would be the general question that will come to your mind while buying insurance.

While insurance companies do cater to your coverage needs, they understand very well the impact of these concerns on your mind. Therefore, to make the life easier between the two of you, insurance companies have come up with life insurance premium calculator which can act as the best guiding step for your financial security. An insurance premium calculator is a tool which determines the advantages of insurance policies. This user-friendly tool that offers computations and calculations provides estimation about the required policy.

The calculation of insurance premium using life insurance premium calculators is not a rocket science. It is as good as the day-to-day life science and few mathematical abilities.

Let’s understand how? The amount you pay depends on statistically when the person is likely to meet unfortunate incident, based on a number of risk factors. What you pay for life insurance is not totally out of your control. Today various health fitness regime, health lifestyle measures can alter a number of risk factors associated to your life and you can actually customize life insurance policy for yourself.

Besides, each individual has its own set of needs and requirements. One-size-fits-all is not the formula that we can apply for calculating insurance coverage. The calculation of your premium using life insurance premium calculator completely depends number of family members, your age, risk factors associated, job scenarios, place of living, demographics, presently loans or mortgages, inflation costs and lifestyle patterns. Getting the right coverage starts with knowing the answers to all of the above. These would be ideal factors which have to be analyzed well. A life insurance calculator would then be the correct medium to provide good estimate of your premium and tenure of the policy.

It’s not possible to negotiate the basic premium rates offered by insurance companies. However, using the following tips given below you can surely reduce the costs incurred on premiums while calculating premiums on life insurance premium calculator.

•Set Annual premium mode

Choosing the annual mode of payment reduces the premium cost. Multiple premium will incur additional costs rather than a single yearly premium.

•We live young we live free

Insurance premium increases with age. At a young age, you are medically fit and physically sound. This helps in reducing the insurance cost and in turn reduces your premium amount.

•Tenure

The longer the term of the policy, lower will be the premium. It helps you to build the required corpus with smaller premiums.

•Avoid Extra riders

Additional riders which are not relevant might only add extra costs on your premium. You can lower premium costs by opting only for those riders that you actually need.

•Fitness level

A healthy lifestyle with controlled habits on smoking and drinking will reduce your premium costs. Keep yourself healthy and fit to get the benefit of lower insurance premiums

In life it is better to be confident but over confidence will lead person fall flat on the ground. Many times people don’t realize these petty things associated with insurance coverage and don’t believe in permutations and combinations. It ultimately leads to end up buying policies that will only offer a cover shortage to your family leading nowhere in the race of financial security for them.

Source:(https://lifeinsurancepremiumcalculators.wordpress.com/2015/12/31/how-to-build-financial-solutions-in-life/)

Monday, 21 December 2015

Life Insurance Premium Calculator

In a nutshell, life insurance policies offer monetary benefits to the policyholders’ dependents in case of their untimely demise. This is however only a facet of life insurance policies, as these policies also double as endowment funds, investment and savings instruments, pension funds etc. And to top it all off, you also receive tax benefits on premiums paid toward a life insurance policy. Life insurance policies are designed to effectively provide financial protection for your and your dependents’ futures.

Calculate Life Insurance Premium

Life Insurance Premium

Life insurance premium is the recurring or one-time payment you make towards your life insurance policy. A life insurance policy is valid only if your pay the premiums on time and according to the insurer’s guidelines. In general, you have the option to choose the frequency of premium payments such as monthly, quarterly, half-yearly, yearly, or single premium. A factor of this premium is paid out as sum assured when the benefits of the policy get activated.

The premium for life insurance policies varies according to chosen plans as well as the credentials of the applicant. Usually, a younger, healthier individual will likely be quoted lower premium than a person touching his/her 50s. Similarly, a non-smoker will get preferential premium rates whereas a smoker is likely to be quoted a higher amount. There are various variables that play a part in determining your premium amount, and making your own calculations can only take you so far. This is where life insurance premium calculators come into play.

Life Insurance Premium Calculator

A life insurance premium calculator is a tool that gives you an estimated amount of premium according to your chosen policy and technicalities such as tenure, age, sum assured, premium frequency etc. These calculators are available from the official insurance providers for their exclusive list of products. For instance, the Life Insurance Corporation of India (LIC) has its own premium calculator for life insurance policies. Typically, a life insurance premium calculator includes the following fields where information has to be provided by you:

· Plan name

· Age of applicant

· Sum assured

· Premium frequency

· Tenure

· Riders, if any

The whole form takes less than a minute to fill up, and once you have input all the required data and preferences, an estimated figure of premium will be displayed as result. The result is an estimate as the insurer may go for further details about your background that can affect the premium calculations.

Sample Life Insurance Premium Calculation

Life insurance premium calculations are complicated and can’t be done by prospective customers on their own due to the numerous underlying variables. A premium calculator is your best bet in this scenario. Let’s take the example of LIC premium calculator to illustrate premium calculations.

The calculator has 4-5 fields depending on the selected plan. For this illustration, we will select the New Endowment Plan that has the highest number of fields including:

· Plan type: New Endowment Plan

· Age: 38 years

· Term: 20 years

· Sum assured: Rs.10 lacs

Accident Benefit (Rider): Yes/selected*

*The Accident Benefit rider provides additional cover for accidental death on top of the base insurance plan, by adding a small amount of premium on the base premium. Other insurers may or may not provide the option for adding riders.

The results of this calculation are as follows:

· Yearly premium: Rs.49,940

· Half yearly premium: Rs.25,235

· Quarterly premium: Rs.12,750

· Monthly premium: Rs.4,250

The premium figures are shown in four different varieties. Typically, yearly premiums will cost you less in the long run than opting for the more frequent half-yearly, quarterly, and monthly options.

Source: https://www.bankbazaar.com/insurance/life-insurance-premium-calculator.html

Friday, 18 December 2015

3 ways to calculate your insurance needs

Calculating how much life insurance you need is one of the most important financial decisions you will ever make. It should never be an isolated decision depending only on how much of a premium you can afford.

Having said that, there are many ways in which you can determine how much insurance you need.

Here we give you a few.

Income Replacement Value

This is one of the basic methods of insurance calculation and is based on your current annual income.

Insurance needs = annual income * number of years left for retirement.

Let's say your annual income is Rs 5,00,000. And you are 45 years old with 15 more years for retirement.

In this case your insurance cover equals Rs 5,00,000 * 15 = Rs 75,00,000.

Another way in which income replacement works is to multiply the annual income by 10 (also known as Income Replacement Multiplier).

Insurance terms you must know

Another variant states that the Income Replacement Multiplier changes with age. So between the ages of 20-30 years, the income multiplier is 5-10, and from 30 to 40, the income multiplier is 15-20.

It drops to 10-15 between the age of 40 and 50 and further to 5-10 between 50 and 60.

Some calculations also take into account any outstanding loan amount that you may have on your housing loan, personal loan etc.

Human Life Value (HLV)

This method of calculating life insurance is based on contribution that one makes and would have made to her/his family in case of sudden demise.

So HLV is defined as the present value of all future income that you could expect to earn for your family's benefit. It also includes other value you expect to contribute, less personal expenses, life insurance premiums and taxes through your planned retirement date.

Let's see this example for better understanding.

Ram is 40 years old and plans to retire at 60. His current salary is Rs 3 lakhs and is expected to remain same every year. His personal expenses, life insurance premiums that he pays and taxes are around Rs 1.25 lakhs. His contribution to his family is rest of his salary of around Rs 1.75 lakhs.

Here, Ram's Annual Life Value (his economic contribution to his family post his expenses) is Rs 1.75 lakhs.

Suppose Ram dies at 41, then the economic value (namely Rs 1.75 lakhs) he would have added every year (from age 41-60) to his family is no longer there. So to protect this economic value, Ram can use life insurance as a safety valve so in case of his death, this economic value can come to the family.

Gross Total Income: Rs 3 lakhs

Less Self - Maintenance Charges: Rs 1 lakh

Tax Payable: Rs 10,000

Life Insurance Premium: Rs 15,000

Surplus Income Generated for Family: Rs1.75 lakhs

If this surplus income is capitalised at a discount rate (expected return rate) of 8 per cent per annum for 20 years, then the HLV will be = Rs 175,000*10.6 = Rs 18.55 lakhs.

5 things your insurance agent won't tell you

In short, Human Life concept arrives at an estimate of insurance cover required as on date to protect the income earners' economic value to their families including their future earning potential and capacity.

This multiplier 10.6 above can be calculated using the Present Value Function in an Excel spreadsheet.

Go to excel spreadsheet; click on Insert tab; click on the 'Function' option; select function PV (that is the present value of your investment; it gives the total value of a series of future payments that is worth today).

A box opens up where in you can fill in the above values for rate (8%, that is the return one can expect over the next 20 years), period (20, assuming you will make payments for the next 20 years) and pmt (payment made every year and which cannot change during the next 20 years) and Type (a logical value which should be 1 at the beginning of the period; it becomes 0 at the end of the period, that is, at the end of 20 years).

Rate = 8 %

Period: 20 Years (Age 41-60)

Pmt: Rs 1 will give you this multiplier. If you put Rs 1.75 lakhs here it will give you the value of Rs 18.55 lakhs

Needs Analysis

In this method, you can assess your needs -- and the needs of your loved ones -- and make a calculated assessment.

The most critical factors are the number of dependents you have and their needs.

Other major factors to consider are:

Loans
Kind of lifestyle you want to provide to your family
Provision for non-working spouse who would no longer get an income
Child's education
Child's marriage
Providing for financially dependent parents
Special needs
Dreams and aspirations such as contributing to charitable causes

Once you determine the above factors, you run the following calculations:

1. Lump sum needs on Life to be Insured's death

a. Home loan payoff

b. Car loan payoff

c. Child's education

d. Child's marriage

e. Emergency fund post death

2. Monthly income needs

a. Monthly expenses

b. Income of Living spouse in case she earns, or rent or interest

c. Shortfall = (a-b)

Shortfall is a-b. Suppose, expenses are Rs 50,000 and spouse's income is Rs 30,000 post tax, then shortfall is Rs 20,000 (50,000-30,000).

d. Monthly income needs till child turns 21 or is self-sufficient:

e. Number of years to go: For the child to reach 21 and post that for the spouse till her age of 80 or 90 years

f. Annual income needs: Of spouse, children or dependents

g. Total income needs: Of spouse, children or dependents

3. Sum up the current invested assets and current life insurance cover. Now see how much this total differs by what you have calculated above. This will be the shortfall (considering that you die today) that you will need to get covered. But do note that invested assets exclude residence, car and other personal assets.

Picking the right one

The one that I prefer and is mostly followed by reputable financial planners for decades is the Needs Analysis Method. Once you determine the amount of life insurance need, just buy the lowest cost insurance plan that's available to you.

Planning to stop your insurance policy?

You should buy insurance after a thorough life insurance premium calculator to calculate capital (lump sum needs on death such as paying off a loan, daughter's marriage or education) as well as the income needs of your family after you are gone.

Ask yourself: If something were to happen to you, what kind of corpus would your family need to maintain their current lifestyle, to fund your child's education as you had envisaged, retirement income for your wife etc.

Most middle-class individuals have insurance policies in the range of Rs 1,00,000 to Rs 10 lakhs. Some of the wealthier ones have more than this.

The question they need to answer is: How long would Rs 10 lakhs suffice?

Finally, remember that your insurance needs go down over a period of time. Hence if you find yourself with a sudden windfall or have accumulated enough wealth, then you can evaluate the need to altogether terminate your insurance policy.

Source: http://www.rediff.com/getahead/2007/feb/21insure.htm