Level term life insurance

Get life cover with a stable pay-out


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One of the most popular life insurance policy types is level term cover. 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:

How does level term life insurance work?

When you open a level term life insurance policy, you’ll be asked to decide on a policy term (usually between 10-30 years), and on the value of the pay-out. Based on this, and on certain other factors outlined below, the cost of your monthly premium will be calculated.

You’ll then pay that premium each month for the duration of the policy. If you die during the policy term, your dependents will receive the pay-out set at the start. If you outlive the policy term, you’ll simply stop paying you premiums and will need to take out a new policy if you feel that you still require cover.

In this way, level term is different to decreasing term life insurance, for which the pay-out decreases over the course of the policy, and whole of life assurance, which doesn’t have a set term and pays out upon your death, regardless as to when that is.

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.

The stability and predictability of the pay-out make level term cover attractive, particularly if your insurance is going to cover day-to-day living costs, or the principle on an interest-only mortgage.

 

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.

Level term insurance with critical illness cover

Critical illness cover is an optional extra that can be added on to any level term life insurance policy. It is designed to pay out a lump sum in the event that you’re affected by one of a list of pre-determined conditions (critical illnesses).

This pay-out can be a great help if you're unable to work due to your condition, allowing you to still keep up with day-to-day living costs and maintain your standard of life.

Related guides

We endeavour to keep our users fully informed when it comes to making a purchasing decision. Please read through our handy guides to find the information you need.

Frequently asked questions

Do I get my money back if I cancel level term life insurance?

This will depend on who you take out insurance with, and when you cancel. Many insurance providers will offer a grace period starting when you take out a policy, during which time if you cancel your policy, you’ll get back what you’d put in so far. If you choose to cancel after the grace period, then some companies will give you back a portion of what you’ve paid minus any admin fees.

What term should I choose for my life insurance?

This will depend entirely on what it is you want to get out of the policy. Most people will pick a period that they absolutely need to be covered for. An example would be a young parent who takes out a policy to ensure that she is covered until the children have grown up. This ensures that she knows that her family will be provided for while it's most important.

Can I cancel level term life insurance at any time?

While there is nothing to stop you cancelling your insurance, it will, of course, mean that you will no longer be able to make a claim. If you do cancel mid-contract, may also be liable to pay certain admin fees. In some instances, it’s better just to let your policy lapse rather than cancel, depending on how long you have left. One thing you will need to be aware of is that many policies will auto-renew, so if you want to end it when the contract is up it’s important to make your provider aware.

Last reviewed: 1 October 2021

Next review: 1 November 2021