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What is Level Term Life Insurance?


Becky Simmonds,
25 April 2022

Reading time: 5 minutes

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What is Level Term Life Insurance?

Level Term Life Insurance lasts for a set period or term, during which you pay fixed monthly premiums. It can provide your dependants with a fixed payout if you pass away at any point during the term of the policy. It's one of the most popular life insurance options, with terms typically ranging from 5-50 years.

This type of cover offers security that your loved ones can receive a specific sum, which can help you plan for a time when you're no longer around.

When you apply for cover, you'll need to choose:

  • The amount of cover
  • The length of the police term
  • Your beneficiaries (if writing into trust)

If the end of the term is reached before you pass away, your cover will expire, and you can stop making premium payments. When the term ends, you can opt to renew it, go with a different provider, or choose not to pay for another policy.

What does Level Term Life Insurance cover?

Level Term Life Insurance pays out a lump sum of money that your dependants can use to cover any financial commitments. It can be used to cover your:

  • Mortgage repayments
  • Household bulls
  • Outstanding debts
  • Childcare costs
  • Day-to-day living expenses
  • Funeral costs

What are the benefits of a Level Term Life policy?

  1. It's practical - Level Term Life Insurance is ideal for protecting your family against large expenses if you were no longer around. The pay-out they receive can be used to pay off mortgage, childcare or university fees, personal debts or even your own funeral costs. Being able to choose the length of the term could be another advantage. Your needs might change with time, so your life insurance may also need to.
  2. Tailored to your needs - The amount that you are covered for is chosen at the start of your policy. This means that if you pass away during the policy term, you'll know what the pay-out will be and could provide your dependents with that reassurance and security.
  3. Cover for Terminal illness - Terminal illness cover is often included with Level Term Life Insurance policies at no extra cost. If it's included, your policy can pay out early on this diagnosis rather than when you pass away, providing your illness is going to prove fatal within a certain time.

What are the disadvantages of a Level Term policy?

  1. It's temporary - If you don't die within the term, then unlike whole-of-life cover, your family won't receive a pay-out. As a policy owner, you'll need to determine how long you need your policy. It's hard to predict your future 20-30 years ahead, so you may need to consider additional policies or cover types for the future too.
  2. Premiums raise when the term expires - Once your term ends, some providers will give you the option to continue your coverage. If you choose to do this, then there is a risk that your premiums will be higher. Your age and other changing circumstances will be taken into consideration again when applying for a new term policy. This can impact how much it will cost and as a general rule of thumb, cover becomes more expensive the older you get.
  3. It's limited - As this type of cover offers a fixed pay-out, it takes no account of inflation. For example, £150,000 in 20 years will not necessarily buy what it does today. If this is something that you are worried about, then it's worth exploring cover that can increase each year. Speak to a consultant about Increasing Term or Index Linked Life Insurance, however, be aware that the premium also changes each year.

How much does Level Term Life Insurance cost?

The amount of Level Term cover you require will depend on what it is you are looking to protect. When determining the amount of cover required, consider how much your dependents would need to pay for all the necessary outgoings and what you can afford each month.

Speak to an expert.

Insurance planning, including Level Term Life Insurance, can be a complex area, so it's important you consider talking to a specialist and finding out about which life insurance type suits your needs.

Call [ phone number - 01489 663 180 ] or make an enquiry at QuoteSearch.com and we'll help you get a free no-obligation quote with an expert, so you can find the right life insurance cover for you.

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