Level Term Life Insurance

When you want to secure the future of people who depend on your income, even after your death, life insurance can be the best way to protect them. It provides you a safety net that your loved ones are secured and you can focus on your main goals. 

Level term is one of the common types of term life insurance that comes with set premium payments and death benefits. It is one of the simplest and most reasonable options for those people who can’t afford the costly premiums of other insurance policy types. 

In this blog post, we will explore all the details and facts about level-term life insurance. We will also discuss its pros and cons, and how it works with many other things. Happy Reading!

What is a level term life insurance? 

Level term life insurance also known as level benefit term life insurance is a type of insurance policy that has the same death benefit and premiums for the whole duration of the plan. If you buy this policy, your beneficiaries will get the same death benefit amount, no matter how far into the term you are at the time of demise. With level-term life insurance, you will get coverage that lasts for a specific time frame. Once that time ends, your coverage will also end. 

How does level-term life insurance work?

The thing that makes a level-term life insurance plan different from other policies is that its premium and death benefits never change. They remain the same throughout the policy. Aside from that, the insurance policy works much like other insurance policies available in the market. 

Also Read: Advantages and Disadvantages of Level Term Life Insurance

First, you select a coverage amount and term length of your policy. Both these factors, along with your age and health condition, affect the cost of your long-term life insurance plan. You pay the premiums monthly or annually and when you die while the coverage is in place, a tax-free death benefit will be paid out to your designated beneficiaries. But if you outlive the plan, it expires and you would not have to pay further premiums. 

To get coverage, you have to fill out an application along with a questionnaire about your health history. According to your policy terms, you may or may not undergo a medical exam being part of the underwriting process. Moreover, some insurance companies offer no medical exam plans to applicants with certain health conditions.  

When you get the policy offer, you have to decide to pay your first premium and do the paperwork to put the policy in force. After that, you just have to pay the premium payments monthly or annually for the rest of your term and you will be covered. 

Things to know before buying Level Term Life Insurance 

Here are things you have to consider before purchasing the level-term plan:

1- The cost of your plan won’t change 

With this plan, the cost of the policy remains the same over the entire term of the policy. The term period usually lasts about 10 or 20 years.  

2- Coverage will end someday

Unlike permanent life insurance which never expires as long as the premiums are paid, a level term insurance policy will end someday in the future. 

3- Conversion to Permanent Insurance 

At the end of the term period, you have the option to convert to permanent insurance in the future as the death benefit of permanent insurance doesn’t expire. With this policy, you can also get some additional benefits that can be used while you are alive. You can easily switch to this plan without any need to re-qualify for coverage, even if your health conditions have changed. 

4- Premiums will be paid by the insurer if you become disabled

In case you become disabled in the future and you have the optional Waiver of Premium benefits, the rest of your premiums will be the responsibility of your insurance company. Moreover, if you convert into a permanent policy, the company will pay those premiums too. You can use the cash value built through the permanent policy. 

What are the benefits and drawbacks of level-term life insurance? 

Advantages of Level Term Life Insurance 

  • The cheapest form of life insurance: Level-term insurance is much cheaper and more affordable than a comparable whole life insurance policy. 
  • Easy to manage: It’s very low maintenance only with a few extra fees or additional components. You do not need to upkeep it, just have to pay the premiums. 
  • Lasts only as long as you need it: Some people find that by or after retirement, there is no need to pay for more life insurance as their major financial expenditures are covered. 
  • Unchanged premiums and death benefits: You won’t have to worry about adjusting your budget to fulfill your coverage. 

Disadvantages of Level Term Life Insurance 

No doubt level term life insurance is affordable for most people, but it’s not the right choice for everyone. Below are some reasons that level term might not be a good fit for you according to your requirements. 

  • More expensive with age: Level terms get expensive to buy as you get older because of increased insurance risk. 
  • No cash value: This policy is planned for financial protection as opposed to wealth-building strategies like it comes with no cash value growth for tax-deferred savings. 
  • Premiums will not be refunded if you outlive the plan: Just like health or car insurance, if you don’t use the benefit you will get nothing from the paid premiums. 


When should you review your level-term life insurance plan?

However, you won’t make many changes to your policy during the term, sometimes you may have to review your policy like: 

Change in your family situation: When your family undergoes any changes like childbirth or divorce, you have to review the policy to ensure that the designated beneficiaries are still correct.  

Changes at job: Maybe your income will increase or you may switch your job and want to add your insurance coverage in the future. You may need to review the policy. 

Your financial plan changes: When you first get an insurance plan, you may have some savings with a large mortgage. With time, your savings will grow and your mortgage will shrink. In that case, you want to reduce your death benefit or maybe consider converting your policy to a permanent one. 

Final Verdict 

In today’s busy life routine, getting a level of term life insurance would make you stress-free about the financial future of your loved ones. While having the insurance in place, you are sure that your family is protected which lets you get determined to the things that matter most.