Calculating what life insurance will cost

Calculating what life insurance costs for an individual is based on a number of factors. The person’s age, health, and occupation are reviewed, along with personal habits such as whether the person is a smoker.

Before buying life insurance, most people will want an indication of what life insurance may cost for them. As life insurance is such a personal purchase based on your own set of circumstances, there is no reliable way to get a ballpark life insurance quote without answering a few questions first. However with improvements in technology, it’s just as easy to get an actual life insurance quote that is both accurate to your individual circumstances, and can also be purchased immediately online, rather than using a generic life insurance calculator.

What to consider when using a life insurance calculator

Although price may be one of the main variables you consider when buying life insurance, it is important to make sure you choose the policy that is best for you. This means looking at what the policy actually covers you for, before simply purchasing the cheapest life insurance policy available.

1. Compare the policy coverage, as well as the price.

As with all purchases, you get what you pay for. Cheapest isn’t always best, especially when it comes to a purchase as important as life insurance.

Life insurance is one of those products where it is tough to compare apples with apples. There is a range of policy types, each with varying levels of cover. If you’re comparing life insurance on price alone, then you are likely to be comparing apples with oranges.

When comparing life insurance policies, a few of the things to consider are:

1. Level of cover – the lump sum paid out upon death or terminal illness
2. Exclusions – what situations will result in a payment not being made
3. Funeral Grant value – the amount promptly paid to help with funeral costs
4. Financial Planning Grant – whether the insurer will pay a sum during a successful claim to help with financial planning advice
5. Policy wording upgrades – if the policy that you buy is upgraded or improved in the future, will these improvements be ‘passed back’ to existing policy holders?

There are also many other variables that go into deciding which life insurance policy is best for you. As you can see, more than just price needs to be factored into choosing a life insurance policy.

2. Choose the right amount of cover for you

One of the key things you need to decide is the amount you want to be covered for. Most online life insurance calculators will let you select a figure, often ranging from $100,000 to over $1 million.

When choosing your amount of cover, take into account how much money your family and dependants will need to continue to live without too much financial disruption. Ask yourself how much they will be affected if you can no longer contribute towards the mortgage, rent, or household expenses, and how much it would take to ease this disruption.

Typically, cheaper life insurance policies will be for low levels of cover, and as you increase the amount you want to be covered for, your fortnightly or monthly premium will increase.