Most people overestimate the cost of life insurance, discouraging them from getting the life insurance coverage they need. But with tools like a life insurance calculator, you can take the guesswork out of estimating your insurance costs – and you may find that it’s much more affordable than you previously thought!
Use this free calculator to get a quote and compare rates!
Calculator Life Insurance: How To Use An Insurance Calculator
Using an insurance calculator is very simple. All you have to do is input your personal information along with your desired coverage amount.
We'll walk you through each step so you can accurately predict your premiums.
1. Enter Your Personal Information
First things first, you’ll need to enter your age, gender, and location – these three factors will be the primary variables for your life insurance policy. Here is why each characteristic is important:
Gender: Women tend to have lower premiums because, on average, they have longer lifespans than men. This means that they’re less risky to insure.
Zip Code: The types of policies and rates available to you differ depending on your state.
2. Choose A Type Of Policy
If you're purchasing individual life insurance, you’ll have to choose between permanent (a.k.a. whole) life and term life insurance. Here’s a quick breakdown of the difference:
Whole life: You are covered for the rest of your life, but premiums are higher. There is a cash value component that allows you to grow your money.
Term life: You are covered for a limited period of time, but premiums are significantly cheaper.
Term life is much simpler than whole life, so you can get a relatively accurate life insurance quote using a calculator. But if you’re looking for permanent insurance, you’ll have to talk with the life insurance company directly for a quotation.
You should also keep in mind that not every life insurance company will offer the type of policy you need – an agent can help you find a company that offers the coverage you’re looking for.
3. Decide On The Term Length
If you pick term life insurance, you have to choose the term length. As a rule of thumb, always pick a term length that exceeds your financial obligations.
For example, if you have young children, you might want to buy a life insurance policy that provides coverage for the next 20 years. This way, your death benefit can cover your loved ones’ education expenses or your mortgage balance in the event that you pass away during the coverage period. Once you get older and once your kids become financially independent, you can allow your term life insurance to expire.
4. Pick Your Coverage Amount
Excessive coverage needlessly drives up your costs, but you also don’t want to leave your family with too little. So how much life insurance do you actually need?
The short answer: it all depends on your current financial situation and your long-term obligations.
Most people purchase life insurance as income replacement in case they die. If this is true for you, you'll need to multiply your annual income by the number of years you want to replace it. When the time comes, your family can use the proceeds from your insurance to cover their household bills or college expenses.
Let’s say your annual income is at $50,000, and you want to cover your family for 10 years after you die. You’d need at least $500,000 in coverage.
You should also factor in your credit card debt, your mortgage balance, or student loans. That way, your family can use the death benefit from your life insurance to pay off these debts.
If you're only purchasing an insurance policy to help your family pay off final expenses like your funeral costs, the amount of life insurance you get can be smaller (like $50,000 or less). Compute how much your end-of-life expenses will be, so you can accurately determine how much life insurance you may need.
Wesley LLC | Expert Consultation
Using a life insurance calculator is an easy and simple way to determine how much you'll pay for insurance. Note that rates vary depending on the life insurance company, so it's wise to get multiple quotes for the same policy.
If you need life insurance or financial services advice, get in touch with Wesley LLC. We’ll find the policy that best suits your life insurance needs. Contact us today for more information on how we can help you!