Level term life assurance: what is it?
Life assurance, or life insurance, is a way to ensure that your family will have some financial protection if you die. Families can use their final cash payout for any purpose. It commonly helps towards paying the mortgage, bills and debts, and supporting your children. It is very reassuring to know that your family could still be financially comfortable when you are no longer able to support them.
What is term life assurance?
Many life assurance policies are active for a fixed period of time, which is referred to as a "term." When you buy term life assurance you can choose how long you want it for, for example five or ten years. When the policy expires you will no longer be covered, at which point you may choose to renew or find another policy.
What is level term life assurance?
Level term life assurance is based around a simple concept. The amount you pay per month (your premiums) and the amount your family will receive if you die will remain fixed throughout your policy. The exact size of the final payout is determined by you when you take out the policy. This will be based on how much you think your family will need, as well as how much you are willing to pay per month. The more you pay every month, the more your family could get if you die. Knowing the exact amount your family will receive can provide you with peace of mind.
Although you can determine how much you pay per month, the cost of any life insurance relative to the payout can also be increased by a number of personal factors. For example, life insurance costs more as you get older. If you are a man you may have to pay more than a woman because, on average, women live longer - and therefore they are less likely to claim. If you have a dangerous job this will make your cover more costly: for example someone in the armed forces will probably have to pay more than an office worker. Being a smoker or having any relevant medical conditions in your medical history could also increase the price of your premiums.
What other types of life insurance are there?
Level term cover is different from whole-of-life cover. Level term cover only lasts for a predetermined amount of time, whereas whole-of-life cover insures you for the rest of your life. Whole-of-life cover tends to cost more because, as long as all the terms of the policy are met, it is guaranteed to pay out. Level term cover only lasts for a fixed amount of time so there is no guarantee it will pay out before it expires.
Decreasing term cover , though it still only lasts for a certain term, is a different kind of policy. Unlike level term cover, the size of the payout does not remain fixed. In fact, as the policy goes on, the amount your family could receive actually decreases. These policies are usually designed to decrease in line with factors such as your mortgage payments. Level term cover is therefore a more reliable, but usually more expensive, type of policy.
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Tags: insurance, life insurance, life assurance, mortgage, level term life assurance, smoker, whole of life cover, Decreasing term cover