Using the Term Insurance Premium Calculator & GST on Life Insurance Explained

Life insurance is a key money decision that you should make for your family. It secures your family against financial issues in the event of any untoward incident happening to you. However, when you begin searching for the proper plan, you might find numerous terms such as premium, sum assured, term insurance premium calculator, and even GST on life insurance. These terms may sound vague, but don't panic, this guide shall make it all easy. Let's learn how one can use a term insurance premium calculator in an easy manner and what GST on life insurance actually implies.

What Is Term Insurance?

Let's begin with the very roots of it all. Term insurance is a form of life insurance that offers coverage for a specified number of years, known as the term. If anything goes wrong with the person insured within this term, their family gets a certain amount of money, referred to as the sum assured. But if the person survives the policy term, no money is paid out (except if you have a return of premium plan).

The most significant reason individuals opt for term insurance is that it provides massive coverage at an affordable price. You can avail yourself of a cover of ₹1 crore for a very low premium, particularly if you purchase it early.

Why You Must Calculate Your Premium

When you purchase term insurance, you will need to pay a specific amount on a monthly, quarterly, or annual basis. This amount goes by the name of your premium.

The premium that you pay varies based on numerous factors like:

• Your age

• Your health status

• Your lifestyle (smoking or alcohol consumption)

• Your salary

• The policy duration and sum insured

As everyone's information is unique, the premium also differs from individual to individual. That is where a term insurance premium calculator comes in handy.

What Is a Term Insurance Premium Calculator?

A term insurance premium calculator is an internet-based application which determines for you the amount of premium you will have to pay for your chosen coverage. It is like having a little assistant that computes everything for you within seconds. You simply have to provide a few details, and it quotes you the premium instantly. This is a free, easy, and accessible tool on nearly all life insurance company websites.

How to Use a Term Insurance Premium Calculator

It is very easy to use this calculator. Follow these steps:

• Go to a reputable insurer's website: Go to the site of a life insurance company that you believe in. Most of them have a term insurance premium calculator on the home page.

• Enter your details: Fill in your name, age, gender, income, and sometimes your city or PIN code. This information is used to accurately determine your premium.

• Fill in your lifestyle details: Some calculators may ask whether you smoke or drink. This is because lifestyle factors can impact your premium.

• Select your coverage amount (sum assured): Consider how much your family will require to live comfortably without you present. Decide on a cover amount according to your income, debts, and future family requirements.

• Choose your term: You can opt for the number of years for coverage, say, 20, 30, or 40 years.

• View your premium in real-time: After you've entered the information, your estimated premium amount will be displayed on the calculator in seconds. You can adjust the inputs to view how varying terms or coverage limits affect your premium.

Why You Should Use a Term Insurance Premium Calculator

There are some compelling reasons why the tool is useful for all:

• It is time-saving: You don't need to sit down with an agent or fill out lengthy forms. The calculator provides instant results.

• It's convenient: Even if you are not mathematically inclined, it's easy.

• You can compare plans: You can compare premiums across insurers and select what suits your pocket.

• You can plan better: You will know precisely how much you will pay and can manage your finances accordingly.

Briefly put, it's a fast and intelligent method to ensure that you select the correct plan without ambiguity.

Example of Term Insurance Premium Calculator

Let us consider a simple example. Rahul is 30 years old, a non-smoker, and has an annual income of ₹10 lakh. He wishes to purchase a term insurance policy with ₹1 crore cover for 30 years. When he feeds these inputs to the term insurance premium calculator, it displays his approximate premium as around ₹800 monthly.

If he raises his coverage to ₹2 crore, his premium could rise to ₹1,400 per month. So, with a few clicks, Rahul can observe how coverage and age influence the premium amount. 

Now Let's Discuss GST on Life Insurance

When you purchase any life insurance policy, term insurance included, a minimal amount of tax is levied on your premium. This tax is referred to as GST on life insurance Goods and Services Tax. Just as GST is levied when you purchase goods or use services, it's also levied on insurance premiums.

GST Rates on Life Insurance

The GST on life insurance varies with the type of policy you purchase. For term insurance, GST is charged at 18% of the premium.

Let's see this with an example:

Suppose your base premium is ₹1,000 per month. So, GST of 18% would be ₹180.

Therefore, you would actually pay ₹1,180 per month in total.

In short, you pay:

                     Total Premium = Base Premium + 18% GST on Life Insurance

This GST is paid to the government and not retained by the insurance company.

Why Is GST Charged on Life Insurance?

GST is a levy that assists the government in delivering improved public services. It's charged on nearly all services, including banking, telecommunication, and insurance. Earlier, various taxes, such as service tax, were charged individually. But now, GST does everything in a uniform and easy way. So whenever you notice your term insurance premium showing GST, don't forget it's merely a minute tax payment to the country's system.

Can You Obtain Tax Relief Despite Having Paid GST?

Yes, you can. The GST in life insurance doesn't take away your tax relief. You can claim a deduction on the total premium paid along with the GST amount for up to ₹1.5 lakh annually under Section 80C of the Income Tax Act.

Additionally, under Section 10(10D), the amount your family is left with after your death is fully tax-exempt. Therefore, although you pay slightly more in GST, you end up enjoying excellent tax benefits on your entire premium.

Ways to Save Money on Your Premium

The following are some simple ways to keep your premium low:

• Buy early: The younger you are, the lower your premium.

• Opt for online plans: Online term plans are less expensive than offline ones since there are no middlemen.

• Live healthy: Don't smoke and maintain a good lifestyle. It lowers your premium.

• Pay annually: Annual payments are usually less expensive than monthly payments.

• Compare plans: Make use of the term insurance premium calculator on various websites to get the best offer.

Conclusion

Purchasing life insurance doesn't need to be difficult. After you realise how to make use of a term insurance premium calculator and how the GST is charged on life insurance, everything is simpler. A term insurance policy provides you with confidence that your family will be economically secure, regardless of what may happen. 

And using an online calculator, you can view your premium instantly, compare plans, and select the ideal one for your budget. So, spare a few minutes today, open an online calculator, verify your premium, and begin your journey towards a secure life. In fact, it's the greatest gift you can give them.