What is level term?
Level term life insurance is a type of policy which pays out to your beneficiaries if you die within a set time frame. This time frame is variable and chosen by you, and can be anything from 5 years, up to 50 years or more.
Unlike ‘whole of life’ insurance policies, it is possible to outlive your insurance arrangement, so don’t get confused between the two.
- With a level term policy, everything remains level
- You pay a fixed premium every month throughout the term
- The amount that will be paid out to your family remains level
- It’s a good choice of policy for those who want to be insured throughout their working lives, but are happy for it to end once retired
- If you have an interest only mortgage, you should have a level term policy to cover the understanding balance.
How does it work?
Level term life insurance will run for the agreed period, as long as you keep up with your premium payments. If during this time you pass away, a payment will be made to the person/s named on your policy as beneficiaries. You decide who gets the money, how much they get and how it is paid to them.
With this type of insurance, your premiums are fixed at the time you agree to the cover. As life insurance generally gets more expensive the older you become, getting a level term policy while you are still young and healthy can help you fix your payments at a more affordable level.
Whole of life cover
As the name suggests, a whole of life policy stays with you for your entire life, and always pays out when you die. Because the insurer always has to pay out in the end, the premiums for this type of insurance are much higher than with a level term policy.
Joint or single?
You have a choice to buy cover just for yourself, or cover for you and your partner. Be careful about what you choose, because although a joint policy may be marginally cheaper than two individual policies, it will only pay out once.
That means that if your partner were to pass away in 10 years’ time, you would no longer be covered under this policy. You would be left to renegotiate your cover, priced on your new health and age, which will almost certainly be more expensive.
Level term insurance can also include a clause for terminal illness. This means that if you are diagnosed with one of the eligible illnesses and expected to die within 12 months, you and your family can enjoy a lump sum to help you get through those difficult months.
You can also opt to have critical illness cover included, which is designed to provide financial support in the event of you suffering a life changing critical illness. The type of illnesses covered include heart attack, stroke, blindness and cancer, and can go a long way towards replacing lost earnings or covering the expense of your care in the home.
Things to consider with level term:
- It is possible to outlive your policy
- Only pays out if you die within the set term
- The amount paid out remains the same
- The younger you are when taking out the policy the better, as you can fix your premiums at a more affordable rate
- This is not a savings policy
- If you cancel your policy, there is no cash-in value
- Cover will end if you don’t make monthly payments.
Talk to our Reassured consultants on 0808 168 2025 to discuss level term life insurance cover. Alternatively Start Your Quote online today.