April 22, 2024


Savvy business masters

How to Calculate Your Term Insurance Premium?

Guide to Calculate Term Insurance Premium - ABC of Money


People in the age bracket of 20 to 30 years usually choose term insurance plans over whole life insurance. The basic difference between the two is that maturity benefits are paid to the insured in the event of casualties occurring during the tenure of the term insurance. Accordingly, the premium amount for term insurance is comparatively lower, and its calculation is pretty easy.

Term Insurance Meaning

Term insurance is a type of insurance plan wherein the insured gets financial assistance during the entire tenure of the policy. It does not provide permanent coverage, i.e., the insured does not get maturity benefits if they survive the term of the plan. This is a pure life insurance policy where the insurer only guarantees the payment of maturity benefits in case of an unforeseen event during the tenure.

Factors to Consider Before Deciding the Premium Amount

  • Decide the Coverage Amount: Premium is the amount you pay to the insurer against the probability of an unusual event happening. If such an event happens, you need to estimate the probable cash outflow. Thus, you need to decide your coverage amount first.
  • Periodicity: You should have a cover amount sufficient enough to cover your necessary expenses. Periodicity, here, becomes an important factor. Let’s take an example of term insurance for car accidents. The insured needs to evaluate the chances of meeting with an accident depending on their driving skills. The accident may compel them to stay in bed for a longer period. This would impact their monthly salary, while they still need to serve the home loan commitments. 
  • Number of Dependents: A careful evaluation of the contingencies is necessary before deciding the and coverage and premium amount. The number of dependents on you is another important factor. You may need more coverage, and hence pay a higher premium cost if your number of dependents is high. Higher coverage helps you to consider all possible emergencies and situations.
  • Age Group and Present Income: Your age group is another important factor while determining the premium amount. A young adult will have to pay a lower premium price as compared to someone who is beyond 40 years of age or more. Furthermore, on a general basis, the coverage amount should be 10-15 times the present income annually.

How to Use a Term Insurance Premium Calculator?

This is a step-by-step process for evaluating the term insurance premium amount:

Step 1: Input Your Basic Details

Basic details such as gender, annual income, number of dependents, required coverage, marital status, etc., may be asked. You may also need to specify whether you smoke or not.

Step 2: Specify the Required Sum

Based on your emergency needs, you can evaluate the quantum of funds you would require if contingencies occur.

Step 3: Specify the Term for the Required Cover 

The next step is to specify the period for which you require the term insurance. A higher term entails a higher premium amount. A higher term helps you to get an extended period of coverage. Also, you need to specify your preferred method of payment, i.e., annual premium payment in a lump sum or through monthly EMIs.

The calculator would then help you with the amount of premium required to be paid for the desired coverage amount.

Step 4: Choose the Plan

The calculator will also help you choose the best insurance plan as per the data. With the details in place, you can compare different plans and choose accordingly. The calculations will help to clear the ambiguities. Choose the plan that fulfils your desires.

Importance of Term Insurance Premium Calculator

  • The basic importance of a term insurance premium calculator is that it helps you calculate the amount of premiums to be paid. This will help you plan the finances accordingly, along with getting the required financial coverage. This will further help to structure your budget appropriately without pressuring other commitments.
  • Using the premium calculator, you can understand the outflow under different plans. You can then choose the more convenient insurance plan.
  • The calculation does not require you to submit any documents. It would calculate the amount once you specify the basic inputs. Thus, there’s no need to travel to insurance agents for such a basic check.
  • Now, there are multiple insurers with discounts and offers. You may save some extra bucks by choosing the best insurer with offers.


Using the calculator is pretty easy for the one who knows exactly what they require from the term insurance plan. The term insurance premium calculator is a convenient tool to quickly evaluate the amount of expected premium in your specific circumstances.