Understanding Level Term Life Insurance

September 23, 2020 04:00 newlambertagency

Term life insurance is the simplest form of life insurance. It is affordable and straightforward. You pay regular premiums, and if you die over the course of the term a death benefit is paid out to your loved ones. If you outlive the term, the policy expires and you stop paying.

There are different versions of term life insurance. However, people buying term life insurance are buying level term life insurance, an important distinction that guarantees you pay the same price for your policy no matter how long it’s active.

What is Level Term Life Insurance?

It is one of the most popular types of life insurance that offers you protection in the event of your demise within the term of the policy. Unlike decreasing term insurance, the amount paid as premium as well as the sum assured does not change over the course of the policy term.

That means regardless of whether you die in the 4th year or 24th year of your 30-year policy, your beneficiaries will get paid the same amount. That is why they’re also known as level benefit term life insurance.

The cost of premiums for level term life insurance varies from person to person and relies on a person’s well-being, age, and occupation. Thus you must keep up the premium payments to keep the policy coverage in place.

How do they work?

They follow the same basic process as other life insurance policies:

You chose a policy, along with a death benefit amount and term period. The cost of a term life insurance policy is determined by these, as well as the applicant’s health and age. The premiums can be paid monthly or annually.

If you or the insured person dies during the policy term, the death benefit is paid out to the named beneficiaries. If the policyholder outlives the policy, the policy expires and they don’t have to pay the premium anymore.

The terms typically last anywhere between 10 to 30 years.

Benefits of level term life insurance

Level term life insurance has its perks. 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.

Thus, it can be said that predictability is the main benefit this policy offers as you’ll know how much you’ll be leaving to your beneficiaries no matter when you die, as long as you don’t outlive your policy.

This policy also makes budgeting easy since the amount you pay for your coverage throughout the policy will remain the same. And since you’ll be paying the same amount and receiving the same coverage throughout the life of the policy, you can get 10, 20, or even more than 30 years of coverage based on your current age.

Such benefits are what make level term life insurance so popular.