The word “level” in the phrase “level term insurance” means that this type of insurance has a fixed premium and face amount (death benefit) throughout the life of the policy.
Simply put, when people talk about term life insurance, they typically refer to level term life insurance.
For the majority of people, it is the simplest and most affordable choice of all life insurance types.
When people purchase term life insurance, they are actually taking out level term life insurance which indicates that you pay the same amount of premium for your life insurance policy regardless how long the term is. The word “term” here refers to a given number of years during which the level term life insurance stays active.
Level term life insurance is one of the most popular life insurance policies that life insurance providers offer to their clients due to its simplicity and affordability. It is also easy to compare level term life insurance quotes and get the best premiums.
How does level term life insurance work?
Level term life insurance has the same fundamental procedure as other types of life insurance policies. The mechanism is as follows:
• Firstly, select a policy, death benefit amount and policy duration (or term length).
• Secondly, choose to pay on either a monthly or annual basis.
• If your premature demise happens within the life of the policy, your life insurer will pay a lump sum of death benefit to your predetermined beneficiaries.
• If you live longer than the term length of the policy, this means it will expire and you no longer pay premiums.
The End of Level Term Life Insurance
Your level term life insurance policy expires once you come to the end of your policy’s term. At this point, you have the following options:
Option A: Stay uninsured. This option suits you when you can insure on your own and when you have no debts or dependents.
Option B: Buy a new level term life insurance policy. This means that you will have to pass the medical exam once again. Although your premiums will be level (fixed), they will be higher than those of the policy that already expired.
Pros and Cons of Level Term Life Insurance
Despite the suitability of level term life insurance for the majority of people, it presents some drawbacks.
Benefits of Level Term Life Insurance
• Foreseeable financial shield with fixed premiums and stable death benefit.
• Most affordable type of life insurance for the majority of people.
• Easy to understand with merely a few extra fees.
Drawbacks of Level Term Life Insurance
• Has an expiration date, meaning you probably have to purchase a new and pricier life insurance policy at a later stage.
• If you live longer than the life of the policy, premiums are not returned.
• No cash value.