What is level term life insurance?
Level term life insurance is often a popular choice because of its simplicity and the amount of control it can give to the policy holder.
How does it work?
When you take out your policy you can decide how much your family will receive if you die. This will be based on a number of factors, such as how much you think you will owe on your mortgage and other bills. You could also leave a sum of money to help support your children's education and general wellbeing. The size of the final payout will be mostly determined by how much you can pay per month. If you pay more, your family will receive more. It's that simple. The size of your premiums and the amount you will receive remains constant throughout your policy. This will ensure you have total peace of mind while your policy is active.
How long does it last?
Level term life insurance only lasts for a predetermined amount of time. You will decide how long you want the term of your policy to be when you start it. Many people only buy insurance for as long as they think they'll need it, for example they may plan towards a date when their mortgage will be paid off. If a claim is made while the policy is still active - and all the terms and conditions have been met - your family are guaranteed the agreed payout.
How much does it cost?
This kind of life insurance is very flexible when it comes to cost. You decide how much you are willing to pay based on the desired size of the final sum, as mentioned earlier. There are, however, other factors that affect cost. These include:
- Your age. As a rule, the older you are, the more your life insurance will cost.
- Your occupation. People in dangerous occupations, for example the armed forces, are considered more likely to make a claim.
- If you are a smoker you will probably have to pay higher premiums than a non-smoker.
- Any relevant medical conditions that you have, or have had in the past, can also influence the cost of a policy.
How is it different to other kinds of life insurance?
Level term cover is generally cheaper than whole-of-life cover. This is because you cannot guarantee that a claim will be made during the policy. Whole-of-life is guaranteed to pay out at some point as long as the policy holder adheres to the rules, so it costs more.
In general it is more expensive that some other kinds of term cover, such as decreasing term insurance, because it is more reliable. This is because you are guaranteed a payout of a fixed size as long as the conditions of the policy are met. The amount you receive from decreasing term policy gradually decreases as time goes on.
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