Life Insurance – What exactly is a level term?

Level term life insurance covers you for a fixed period of time and will pay out a lump sum if you die during the term of policy. The amount you are covered for is fixed at the start of the plan and won’t change. The premiums remain fixed throughout the term of the plan, as well as the lump sum amount that will be paid to your family upon your death.

Level term life insurance should not be confused with a whole of life cover policy. As the name suggests, a whole of life policy stays with you for your entire life, no matter what age you get to and always pays out when you die. As you can imagine, the premiums for this type of insurance are much higher than with a level term policy, simply because the insurer will have to pay out with a whole of life policy. If you die after your ‘term’ has finished with a level term policy, then there will be no pay out.

Another factor to consider with level term life insurance is whether to cover just for yourself, or cover for you and your partner. Although a joint policy may be slightly cheaper than two individual policies, it will only pay out once. That means that if your partner were to pass away in 15 years time, you would no longer be covered under this policy. You would be left to speak to your insurer regarding the cover and they will re-quote based on your new health and age, which will almost certainly be more expensive after the elapsed time period.

Since level term life insurance policies don’t change their payout over time, it is important to think about how much cover you need before buying, as you are committing to making that money payment for the next x amount of years. Consider existing debts, expenses, mortgage etc to get a better idea of how much life cover you need. Don’t forget that your circumstances may change over time so it’s worth reassessing your circumstances every now and then to make sure that you’re not under-insuring yourself or overpaying on your policy.

One way to get a good idea of budgeting is to speak to a consultant free of charge who can break down your monthly costs and inform you of what term could suit you best.

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