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Level Term Life Insurance – How it Works

What is Level Term Life Insurance?

A Level Term life insurance policy is one that provides a constant cover value for the entire set period that the policy is valid. Because the premiums are fixed and stay exactly the same, as does the agreed payout should you die in this time, it is ‘level’, hence the name Level Term. The price doesn’t increase or decrease and the term is whatever you agreed to it. So valid until you’re 65, 70 etc.

If you want to extend this level term life insurance you’ll need to do get new insurance, but remember life insurance taken out when you’re younger and healthier is cheaper. If you want life insurance to have a guaranteed payout when you die, irrespective of how far into the future, then you probably want Whole Life cover instead.

Should I choose Level Term Life Insurance?

We’re a non-advisory service, so we just present the facts alongside some excellent quotes tailored to your unique circumstances. However you may find a Level Term Policy suitable if you are interested in protecting more than just a mortgage, especially if you have children and you want to safeguard their financial interests in the unexpected event of your demise. Level term policies are generally more expensive, but they also pay out more too, because Decreasing Term Life Insurance for example would be intended to pay off a mortgage and that mortgage will depreciate overtime with payments, so too would your insurance to cover it. Unlike Level Term Policies that remain constant, so as to pay off debt and provide a lump sum to your beneficiaries if you die before the term ends.

One of the key benefits of a Level Term Life Insurance policy over a Decreasing Term Life Insurance Policy is that in the case of the former, you could pay off the entirety of your mortgage, and have money left over for your children and/or partner. Whereas a Decreasing Term policy would only pay off your mortgage, and your family would not have the financial safety net should the worst happen.

The benefits of Level Term cover

The policy and premiums remain level throughout the entire term of the cover. The sum owed to you if you die in this time stays the same, and the premiums stay the same too. Regardless of inflation and economic factors. You’ll pay exactly the same amount for your entire insurance agreement years into the future.

Level Term policies are suitable for those wanting to leave a lump sum amount to family to protect them, and you can even organised a Trust arrangement to ensure that the inheritance tax doesn’t take a bite out of this payout.

Things to consider with a Level Term policy

Because there is a lump sum payout, Level Term policies can actually give you more cover than you need them to. Whilst it is nice to be able to leave hundreds of thousands of pounds to your loved ones if you die – keep in mind that your monthly premiums increase in keeping with the sum. So the less the payout, the less you pay each month. If you can’t afford the monthly premiums and the payments lapse, then you could lose your cover entirely.

If your central concern is your mortgage, consider a Decreasing Term Life Insurance policy instead. It could be more price effective then a Level Term Life Insurance policy, but note it is only suitable for mortgages where there is a repayment and not a mortgage where it is interest-only.

The other consideration is that a Level Term policy expires after the agreed term. If you want to be covered until you die, and have a payout to your loved ones even after the term expires, then you might consider looking into a Whole of Life policy instead.

Level Term policies are one of the most common policies for parents. You can also purchase these policies to cover yourself and a partner. These are known as joint policies, if you just make the purchase for yourself it is a single policy. Consider however that when one of two people in a join level term policy dies, the other is no longer covered by the policy and so would need a new policy to ensure further protection. For this reason some people prefer to take out two single policies instead, so that both partners are protected within the term.

Level Term protection plans do not have a cash-in value and cover ceases at the end of the agreed term, or if you do not maintain your premium payments.

Factors affecting the cost of a Level Term Policy

Health and lifestyle factors influence the monthly premiums that you would pay, and how much insurers would be willing to cover you for. We ask a series of questions to accurately determine these factors, and it is very important that you are truthful to ensure that the Life Insurance policy is quoted accurately, and so that you will be paid out. Height and weight, smoking history (have you smoked within the last 12 months?) and any family history of illness, or ongoing illnesses will all be risk considerations. Another key factor is also your occupation, riskier jobs drive up premiums, and conversely safer jobs lower those premiums. A construction worker is a bigger risk than a receptionist for example.

Would you like Level Term Life Insurance?

We’re here to help with this. Use the quote comparison service on our site to find a Level Term policy that is right for you. Then our diligent insurance brokers will give you a ring to discuss your options, and get you set up and covered same day (in most instances) to give you quick and easy peace of mind.

Alternatively, you can call us directly. We’re a non-advisory service, so we will provide you all the facts to any of the questions you have, go through the quotes with you, and not burden you with our opinions.