Level Term Life Insurance
One of the most popular life insurance policy types is level term insurance. These policies will offer you protection in the event that you die within a certain set period. The amount paid out will not change over the course of the policy term unlike with decreasing term insurance.
In this guide:
What are the benefits of level term life insurance?
When you take out a level term life insurance policy, you’ll set a term at the beginning, usually around 25 years, as well as a pay-out size. This pay-out will be the same whether you die at the beginning or end of the policy term.
One of the main reasons people take out life insurance policies is to make sure that their remaining family can keep up with mortgage repayments in the unfortunate event of their death.
People in this position will generally set the term as the same as that associated with the mortgage. If you’ve got a repayment mortgage, rather than an interest-only mortgage, then this has the added benefit in that the later in the term that a claim is made, the more money there is to be paid out in excess of that which is left on the mortgage, leaving more spare cash for you loved ones.
The same goes for any other household or personal debts you may have, not just mortgages.
Level term life insurance is not just for debts though, you may simply want to leave a certain amount of money for your family to help them cope financially during the most difficult of times.
It is important to bear in mind that should you live beyond the length of the policy term, you will no longer be protected in the event of your death and if you wish to open up a new policy to continue cover, it will be more expensive due to your increased age.
Costs of Level Term Life Insurance
The price of your premiums will be based on various things. Firstly, your health, you family medical history and the general riskiness of your lifestyle – this includes whether or not you smoke.
Beyond this, the length of the term you choose and the size of the pay-out you want will of course set the amount you pay for your premiums.
Generally, level term life insurance policies come with guaranteed premiums, meaning that they will stay the same throughout the course of the policy’s term. This is as opposed the reviewable premiums, which are subject to change according to various factors including general changes in the insurance market and inflation.
Decreasing Term Life Insurance
An alternative to level term life insurance that is particularly appropriate for those with repayment mortgages is decreasing term life insurance.
As the name would suggest, with these kinds of policies, the pay-out decreases over time as the size of outstanding repayments on your mortgage or other debts go down.
Decreasing term life insurance policies are, other things being equal, cheaper than level term policies given the decreasing pay-out size.
Whole of Life Insurance
On the other side of the spectrum, we have whole of life cover, which assures a pay-out upon the death of the policy holder without requiring a set term.
Given that these polices do not run out until either you cancel them or you die, they tend to be more expensive than both decreasing and level term insurance.
And again, given the increased length of whole of life policies, they will generally come with reviewable premiums, subject to increases during the course of the policy.
Compare Level Term Life Insurance Policies
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