What is Level Term Life Insurance?

By Vicki Coleman

Level term life insurance is a fixed term insurance policy, and it's ideal for protecting your family against large expenses if you were no longer around.

What is Level Term Life Insurance?

With so many different life insurance policies available, it can be difficult to know which one is right for you and your circumstances. We’ve put this article together to help you understand what is meant by ‘level term life insurance’.

To put it simply, level term life insurance lasts for a set period or term, during which you pay fixed monthly premiums.

This type of policy can provide your dependants with a fixed pay-out 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 and peace of mind that your loved ones will receive a specific sum after you pass, which means can help you financially support them, even 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 a trust)

If the end of the term is reached before you pass away, your cover will expire, and you can stop making premium payments. It’s worth noting that 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 after you pass, that your dependants can use to cover any financial commitments. For example, it can be used to cover your:

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

What are the benefits of a Level Term Life policy?

  1. One of its main benefits, is that 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 cover the above or whatever else they want to use it for. 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. Some more good news, this policy can be 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?

Level term life insurance may not be for you. Whilst it could be ideal for some to protecting their family against large expenses if they were no longer around, it may not be as suitable for others. Here are a few reasons why:

  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 rise 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 does not take into account possible 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.

If you don’t feel comfortable with taking out a life insurance policy online, then we can put you in touch with an expert so you can speak to a consultant about different policies such as increasing term or index linked life insurance, however, be aware that the premium could also changes each year depending on the policy you choose.

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.

What to do next?

If you have decided that level term life insurance is for you, than you can get your free online quote today, all you have to do is click here. Or, if you’re still unsure if it’s the right policy for you, you can compare quotes online and we can get you in touch with an expert to guide you through any questions you may have.

Get a Life Insurance quote now