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• How Is Life Insurance Calculated in Kentucky?
• How Much Life Insurance Do I Need?
• How to Calculate the Cash Surrender Value of Life Insurance in Kentucky
• How Are Life Insurance Dividends Calculated in Kentucky?
• How to Calculate Kentucky Group Life Insurance
• How Can a Kentucky Insurance Agent Help?

Life insurance is designed to help those you leave behind with financial obligations. Even though 54% of people own life insurance, many struggle to understand how how life insurance is calculated. 

Fortunately, Kentucky independent insurance agents are experts in all things life insurance. They not only know where to find it, but also how insurance companies calculate premiums so that you can get an affordable policy. To start, let's learn more about how life insurance is calculated. 

How Is Life Insurance Calculated in Kentucky?

In line with any insurance that you purchase, the price you pay for life insurance depends on a number of factors. Some of the most common factors are age, medical history, lifestyle, gender, and career. In addition, the following factors play a key role in calculating life insurance.

• Underwriting process:  During the underwriting process, your insurance carrier will be looking at the various factors listed above in addition to other things that could affect how long you live. Every company assesses risk differently, so you can start to see a difference in calculations during the underwriting process. 
• Mortality: Life insurance is calculated based on the probability of death occurring at a particular age, and this will vary depending on your current health and medical history.
• Underwriting expenses: It cost an insurance company money to write a life insurance policy. Operational costs are often worked into policy premiums.
• Potential profit: Carriers are also considering the profit they can make off your insurance policy when calculating life insurance premium costs.
• Life insurance policy type: The most common policies are term and whole life insurance, and your premium will differ depending on which you choose. 

Insurance expert Paul Martin says you should speak with your Kentucky independent insurance agent if you're unsure whether you can afford life insurance. "If you can’t afford the premium, then you start to prioritize things. Sit down with your agent and start scratching off money until you get to the point where you could afford the policy. If you want to pay for your child's college tuition, maybe you opt to only pay for two years instead of four," explains Martin.

How Much Life Insurance Do I Need?

Martin says that the easiest way to determine how much life insurance you need is to take the emotion out of it and ask yourself one simple question, "How much money do I need to replace my income in the event of my death?" 

You'll want to calculate how much of your income your family relies on for day-to-day living expenses, and then calculate how much longer they'll live once you're gone. The general rule of thumb is to take your income and multiply it by six or ten, and that can determine how much to purchase. However, this might not work for every individual or family. 

Martin suggests evaluating your personal situation and making a list of all of your current expenses and future expected expenses. Determine if you want to pay for things like college tuition, debt, etc. Keep in mind that any debt you leave behind will fall on your family members. Life insurance can help pay off debt, pay for college, and replace income.

How to Calculate the Cash Surrender Value of Life Insurance in Kentucky

When you purchase a life insurance policy, you'll make premium payments over your lifetime. If you choose a whole or universal life insurance policy, you also get a savings account that accrues money. This is referred to as cash value that is accumulated alongside your policy that you can borrow or pull from in the event of emergencies. You can also surrender your policy before the term is up and receive a cash payout. The cash surrender value becomes the amount of money that the insurance company pays if the life insurance policy is voluntarily terminated before the term of the policy ends. 

Your cash value can earn interest over the life of your policy. Calculating the value will depend on factors like the age of the policy and when you decide to surrender the policy. There may be charges for partial or full surrender, and companies can deduct fees upon cash surrender. There also may be a withdrawal penalty depending on the age of the person who will receive the cash funds.

How Are Life Insurance Dividends Calculated In Kentucky?

Dividends are yearly payments that are paid out by an insurance company to life insurance policyholders. Dividends are typically provided to whole or permanent life insurance policies. Dividends are usually paid when a company's annual revenue is higher than expected. Companies use revenue, investment returns, operating expenses, claim expenses, and current interest rates to determine whether they're in the red for the year or not. If they're not in the red, they can choose to pay out dividends to policyholders. Life insurance dividends are typically calculated using the following factors:

• The policy's guaranteed cash value
• The policy's annual premium amount
• The company's mortality and expense costs
• The dividend scale interest rate

Ultimately, if a company has surplus revenue, they may choose to share that with their policyholders.

How to Calculate Kentucky Group Life Insurance

Group life insurance is what is used by companies and organizations to provide life insurance to a group of people. To calculate group life insurance, you multiply the number of thousands of dollars of insurance coverage (less 50,000) by the cost from the group insurance table. 

For Example

The employee's total coverage is 90,000 and his current age is 59, but he will turn 60 in the current year. His taxable cost per month would be:

(90,000 – 50,000) = 40,000

40,000 x .66 rate = 26,400

This amount is then multiplied by 12 and divided by the employee's pay frequency. This total is the calculated cost per period.

26,400 x 12 months = 316,800 / 26 pay periods = $12.18 per pay period.

The IRS requires that the "value" of employer-provided group life insurance that is in excess of $50,000 be reported as taxable income to covered employees. 

How Can a Kentucky Independent Insurance Agent Help?

Calculating life insurance can be confusing, but a Kentucky independent insurance agent is there to help. They understand life insurance, how much you need, and how it's calculated. They can sit down with you to walk through your expenses and expectations for your policy. They'll call a variety of carriers and gather multiple quotes to find one that fits your needs and budget.