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Level Term Life Insurance

If you’re actively looking to take out a life insurance policy, you’ve likely come across various insurance types. There’s a lot to know, and all that information can sometimes feel overwhelming. Since it’s crucial that you select the right policy for you, we’ve put together a helpful guide that will explain everything you need to know about level term life insurance and help you decide whether it’s the right product for you.

What is level term life insurance?

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There are various types of life insurance policies. In this article, we’re going to focus on level term insurance.

A level term policy comes under the umbrella of term life insurance. A policy that offers coverage within a certain period agreed on between you and your insurance provider. The coverage period is down to you and your needs.

A level term policy comes under the umbrella of term life insurance. A policy that offers coverage within a certain period agreed on between you and your insurance provider. The coverage period is down to you and your needs.

If you need to cover your mortgage, for example, you might choose to set the insurance period to match your mortgage contract. You should compare the different types of term life insurance to find the best policy for you.

A level term policy is different from a whole of life policy, where you get insured until you pass away, regardless of when that happens. Since you’re guaranteed a payout, a whole of life policy tends to be more expensive.

Key Features:

  • The payout total in a level term policy remains the same throughout the insurance period. Your premium also remains the same. This is different from a decreasing term policy, where the payout is reduced during the insurance period, but so is your premium. There are situations where a decreasing policy might be better for you.
  • In a level term policy, your family and loved ones will only receive a payout if you pass away during the insured period. If the policy runs out, you’ll no longer be covered, and you’ll need to take out a new contract.
  • The total period of your level term policy will depend on the company you choose; however, typically, you can select a minimum of one year or a maximum of 50 years.

What are the benefits of level term life insurance?

There are various situations where getting a level term policy is more beneficial than other life insurance policies. Here are some common reasons why you might choose it:

  • You have an interest-only mortgage – Since the value of your mortgage won’t change, it’s good to have coverage with a payout that remains the same.
  • You’d like to cover inheritance tax – If you leave a large estate to your family and loved ones, they’ll be hit by a large inheritance tax bill. A level term policy can make it easier to cover this cost during what would already be a difficult period.
  • To cover funeral costs – According to Dignity Funerals, the average cost of a burial funeral in the UK currently stands at £5,033. If you pass away, will your family have enough funds to cover your funeral?
  • To cover living costs – If you pass away prematurely and you’re the primary income earner in your household, your family could land on hard times if you don’t have protection. A level term policy will allow your family to continue with the same standard of living by covering various expenses.

How much does a level term life insurance policy cost?

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The cost of a life insurance policy will depend on various factors. Companies will take into account your age, health, medical history, occupation, lifestyle, and smoking status. They’ll also factor in the policy type, coverage level and total insurance period.

To give you a better idea, here is an example of a level term quote:

  • A non-smoking 50-year old applicant looking for £150,000 to cover a mortgage and living costs over 25 years will be paying approximately £30 per month.

Note that this estimate doesn’t take into account critical illness cover, waiver of premium, or other add-ons. Your quote might be more affordable if you’re younger or more expensive if you partake in extreme sports or if you smoke.

How to get a cheaper level term life insurance premium?

As mentioned earlier in this article, your premium is influenced by various factors. If you find that you’re getting expensive quotes, there are some steps you can take to find a better deal. You should:

  • Get multiple quotes from different companies. The first quote you get isn’t necessarily the best one. Insurance companies can be flexible, so you can probably find a better deal if you look around or use a price comparison site.
  • Make sure you’re only paying for the coverage you need. This is where an insurance calculator is helpful. You don’t want to be paying too much or too little. Discuss your policy in detail with the insurance provider and ask only to include what you need.
  • Improve factors that are in your control. You can quit smoking, a habit that has a significant impact on your premium. You can start living a healthier lifestyle, improve your BMI, and participate in less risky sports. Tackling these issues will not only improve your life insurance premium but also likely improve your quality of life.

Do you need a level term life insurance policy?

Whether you need a level term or decreasing term policy is down to your requirements. You should see a level term policy as a safety net for your family and loved ones. If you were to pass away, does your family have the means to continue the same living standards and cover debt payments? This policy is especially worth it if you have a young family and you’re the primary income earner. A level term policy can provide a payout that will see your children’s expenses covered until they’re likely to be financially independent.

A level term policy can also help your family keep your home if there’s still a mortgage to pay. This can help reduce stress at what would be an already difficult time in their lives.