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Level Term Life Insurance
By Kevin Pratt on Tuesday 15 November 2016
In this Article
Level term life insurance is one of the most common types of life insurance available.
As its name suggests, the amount of cover provided by this kind of policy does not change over time. This means that it won’t increase in line with inflation, or any other measure.
This type of policy also has a set term, which you choose at the outset, and the premiums won’t change during this period either. If you don’t die during the term of the policy, it simply lapses, and you will need to take out a new policy if you still want life insurance.
Reasons to take out level term life insurance
People often buy level term insurance when they take out a mortgage. Having cover in place can provide peace of mind that your mortgage will be paid off when you die, so your loved ones won’t have to struggle to meet monthly payments, or move to a different property.
It is therefore usual to take out a policy for the same term as the mortgage, typically 25 years, as you may only need the cover while you are still paying off your home loan.
some people take out this sort of policy because they have other debts they want paid off in the event of their death
However, you may want to take out level term life insurance for other reasons. For example, some people take out this sort of policy because they have other debts they want paid off in the event of their death.
Others take out this sort of cover simply because they want to be able to leave a set amount for their family when they die.
Whatever the reason you want to take out level term life insurance, make sure you only pay for insurance you actually need. Although it might be tempting to take out cover for hundreds of thousands of pounds to provide your family with a nice lump sum when you die, the more cover you have, the more expensive your premiums will be.
Level term life insurance is the ideal option if you are looking for a set amount of cover for a certain period. However, if you are thinking of buying a policy specifically to cover a debt that will shrink over time, you might be better off opting for ‘decreasing’ rather than level cover.
Decreasing life insurance policies pay out an amount which reduces over time, and means your premiums will be cheaper than with a level term life insurance policy.
Family income benefit policies pay out a monthly income from the point of claim to the end of the policy term and, again, can work out cheaper.
Always give careful thought as to which kind of policy is likely to suit your needs, and compare a wide range of policies before buying cover. Premiums can vary hugely depending on which provider you go to.
Review your cover
You should regularly review your life insurance to ensure it still meets your needs, especially if your circumstances change.
For example, if you buy a bigger property and extend your mortgage, you are likely to need additional cover, perhaps for a longer term. You might also want greater protection in place if your family expands.
Remember, however, never to cancel an existing policy until you have a new one in place, as this will leave your loved once without any protection.
It’s also worth noting that policies become more expensive the older you get, so rather than cancelling any existing cover, it’s worth considering whether or not it might be more cost-effective to take out an additional policy to supplement what you already have.
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