Life Insurance Premium Calculator

The premium for life insurance policies varies according to chosen plans as well as the the applicant's credentials. 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. 

Benefits of Life Insurance Premium Calculator

The following are the benefits of Life Insurnace premium calculator:

1.  Helps deciding most suitable policy: Online premium calculator for life insurance also helps in deciding which is the suitable life insurance policy as per your financial strength and other parameters.

1. Offers an effortless way to calculate premium value: Life insurance premium calculator is an online tool that ensures effortless calculation of premium value without the hassle of manual calculation.

1. Provides error free approximation: The calculation is completely automated and hence, offers an approximated premium value without any error.

1. Helps calculating premium value free of cost: These online life insurance premium calculators are free and do not charge any additional fees from the users.

How to Use a Life Insurance Premium Calculator Effectively

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:

1. Plan name
2. Age of applicant
3. Sum assured
4. Premium frequency
5. Tenure
6. 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:

1. Plan type: New Endowment Plan
2. Age: 38 years
3. Term: 20 years
4. Sum assured: Rs.10 lacs
5. 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:

1. Yearly premium: Rs.49,940
2. Half yearly premium: Rs.25,235
3. Quarterly premium: Rs.12,750
4. 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.

Factors that Decide the Value of Life Insurance Premium

The factors that influence the value of Life Insurance Premium amount:

1. Sum assured amount or the coverage: The more the sum assured or the coverage value, the higher will be the premium value of the policy.

1. Health lifestyle: The healthy lifestyle ensures lower premium rate over those with unhealthy lifestyle such as individuals consuming alcohol and tobacco.

1. Age: Age is one of the primary elements that is considered while determining the premium value of the life insurance policy. Young people fall under the low-risk category and hence, the premium rates are lower when a policy is purchased at a young age.

1. Gender: As per statistical reports and evidence, women live more than man which eventually calls for low premium rates as women opt for long policy term.

1. Profession: The profession of the applicant plays a vital role in determining the premium value. Applicants from professional background with considerable risk factors will have to pay significantly higher premiums than those in the profession with low or no risk factor.

1. Policy term: Term of policy influences the premium value of the policy directly. The longer the policy term the lower the premium value, while premium value increases if the policy term is shorter.

1. Income from investments: The premium is considered while paying the claim for the life insurance policy. Hence, the expected earnings from the investment decide the premium to be paid.

Tips to Reduce Life Insurance Premium

The following are some of the significant points that should be considered to reduce the life insurance premium amount:

1. Select the most suitable policy term: The premium value depends mostly on the term of the policy and hence, it is recommended to opt for a long policy term over shorter ones to cut down on the amount.

1. Do not add riders unnecessarily: Most life insurance policies come with additional coverage option in the form of rider. Availing yourself of rider options increases the premium value of the policy and hence, choose for rider only if you are genuinely in need of additional coverage benefit.

1. Purchase online policy: Try to purchase online policy as it often comes with rebates or discounts and cuts down on additional expense involved in offline purchase.

1. Avoid consumption of alcohol or tobacco: Health is one of the significant parameters that influences the premium value. You need to reduce the consumption of tobacco and alcohol, as the premium rates are lower for the non-alcohol and tobacco consumers.