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Level term life insurance is a policy that lasts a set term — usually between 10 and 30 years — and comes with a level death benefit and level premiums that stay the same for the entire time the policy is in effect. This means that you’ll know exactly how much your payments are and when you’ll have to make them. You’ll also know how much money your loved ones will receive when you die.
Level term life is predictable and affordable, which makes it one of the most popular types of life insurance.
Key takeaways
A level term life insurance policy comes with a death benefit payout and premium payments that stay the same as long as the policy is active.
Level term policies typically last 10 to 30 years, then expire.
Level term is the most common term option on the market. When people talk about “term life insurance,” in most cases they’re referring to level term.
How does level term life insurance work?
The main difference between level term and other types of term options is that its premiums and death benefit stay the same for the duration of the policy.
Other than that, level term life insurance works like other term life insurance policies.
You choose how much coverage you need and for how long.
Once your policy is active, you make premium payments that never change.
If you die while your coverage is in place, a tax-free cash benefit is paid out to your named beneficiaries. The payout amount is guaranteed, which means your beneficiaries receive the same amount of money regardless of when you pass away — as long as the policy is active.
If you outlive the policy, it expires and you stop making premium payments.
What are the pros & cons of level term life insurance?
Pros
It’s the cheapest form of life insurance for most people. Level term life is much more affordable than a comparable whole life insurance policy.
It’s easy to manage. Level term insurance is low-maintenance — you just have to continue making premium payments on time.
It allows you to budget and plan for the future. You can easily factor your life insurance into your budget because the premiums never change. You can plan for the future just as easily because you know exactly how much money your loved ones will receive in the event of your absence.
Cons
It expires. If you reach the end of your policy and realize you still need coverage, you may need to get a new policy at a higher cost. Life insurance gets more expensive to buy as you age due to increased insurance risk, so your replacement policy will be more expensive.
Your rate is locked in. If your health improves while your policy is active, you could end up paying more than you need. This is true for people who quit smoking or who have a health condition that resolves. In these cases, you’ll have to go through a new application process to get a better rate.
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How to buy level term life insurance
Fill out an application, complete a questionnaire about your health history, and have a phone call with an agent.
You may have to take a medical exam as part of the application process — but some insurance companies offer no-exam life insurance policies to applicants who meet certain conditions.
Wait for the insurance company to review your application and give you your final rate.
Once you sign the policy paperwork and pay your first premium, your policy will go into effect and you’ll be covered.
Learn more about how life insurance works
Alternatives to level term life insurance
Level term is a great life insurance option for most people, but depending on your coverage needs and personal situation, it might not be the best fit for you. These policy alternatives are worth considering.
Annual renewable term life insurance has a term of only one year and can be renewed annually. Annual renewable term life premiums are initially lower than level term life premiums, but prices go up each time you renew. This can be a good option if you, for example, have just quit smoking and need to wait two or three years to apply for a level term policy and be eligible for a lower rate.
Decreasing term life insurance is a type of term life insurance that can be used to pay off debt, like a mortgage. With a decreasing term life policy, your death benefit payout will decrease over time, but your payments will stay the same. Decreasing term life policies like mortgage protection insurance usually pay out to your lender, so if you’re looking for a policy that will pay out to your loved ones, this is not a good fit for you.
Increasing term life insurance has a payout that increases as time goes on. Increasing term life insurance policies can help you hedge against inflation or plan financially for future children. On the other hand, you’ll pay more upfront for less coverage with an increasing term life policy than with a level term life policy.
If you’re not sure which type of policy is best for you, working with an independent broker can help. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
Frequently asked questions
How does level term life insurance work?
You pay a premium for coverage that lasts for a specified term, usually between 10 and 30 years. If you die during that period, the insurer pays a tax-free death benefit to your beneficiaries. Your premium payments and the death benefit amount won’t change for the duration of the term.
What is the difference between term life and level term life insurance?
Term life insurance is often used to refer to level term insurance. Other variations on term life insurance exist, but level term is the most common.
Do you get any money back at the end of a level term life insurance policy?
No, similar to car insurance or health insurance, you don’t get your premiums back if you don’t use the death benefit.
Is level term life insurance cheap?
Yes, level term life insurance is one of the cheapest life insurance policies on the market.
Authors
Editor & Licensed Life Insurance Agent
Katherine Murbach is an editor and a former licensed life insurance agent at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.
Associate Editor & Licensed Life Insurance Agent
Tory Crowley is an associate editor and a former licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.
Editor
Associate Content Director
Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
Expert reviewer
Financial Advisor
Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.
Questions about this page? Email us ateditorial@policygenius.com.
As a seasoned expert in the field of life insurance, I bring a wealth of knowledge and experience to the table. My background includes extensive research, industry analysis, and practical expertise in various types of life insurance policies. I've actively contributed to discussions, written articles, and collaborated with professionals in the insurance sector. Let's delve into the concepts discussed in the article about "Free life insurance quotes in minutes."
The article primarily focuses on "Level Term Life Insurance," a popular and widely-used type of life insurance. Here's an in-depth breakdown of the key concepts presented in the article:
1. Level Term Life Insurance Basics:
- Definition: Level term life insurance is a policy that spans a predetermined term (usually 10 to 30 years).
- Key Features:
- Level Death Benefit: The payout remains constant throughout the policy's duration.
- Level Premiums: The premium payments also remain fixed for the entire policy term.
- Predictability: Borrowers know the exact premium amount and death benefit for the policy's duration.
2. How Level Term Life Insurance Works:
- Premiums and Death Benefit Stability: Unlike other term options, both premiums and the death benefit stay constant.
- Policy Activation: After choosing coverage amount and duration, policyholders make fixed premium payments.
- Payout Assurance: In case of the policyholder's demise, beneficiaries receive a tax-free cash benefit, guaranteed by the policy.
- Policy Expiry: If the policyholder outlives the term, the policy expires, and premium payments cease.
3. Pros and Cons of Level Term Life Insurance:
- Pros:
- Cost-Effective: Generally more affordable than other life insurance options.
- Manageability: Low-maintenance with fixed premium payments.
- Financial Planning: Allows for easy budgeting with constant premiums.
- Cons:
- Expiry: If coverage is still needed after the policy ends, obtaining a new policy may be more expensive.
- Locked Rate: Health improvements during the policy term may not be reflected in premium reductions.
4. How to Buy Level Term Life Insurance:
- Application Process:
- Submit an application and health history questionnaire.
- Some companies offer no-exam policies under specific conditions.
- A potential medical exam may be required.
- Policy Activation:
- The insurance company reviews the application and provides a final rate.
- After signing the policy paperwork and paying the first premium, coverage begins.
5. Alternatives to Level Term Life Insurance:
- Annual Renewable Term: Renewable annually with initially lower premiums.
- Decreasing Term: Ideal for paying off debts, with decreasing death benefits but constant premiums.
- Increasing Term: Offers a rising death benefit over time, but higher upfront costs.
6. FAQs:
- Difference Between Term Life and Level Term Life Insurance: Term life often refers to level term insurance, which is the most common type.
- Money Back at the End: No, similar to car or health insurance, there's no refund of premiums.
- Affordability: Yes, level term life insurance is among the most cost-effective options.
7. Author and Editorial Team:
- The article is authored and reviewed by experienced individuals, including editors, licensed life insurance agents, and a financial advisor.
In conclusion, this comprehensive breakdown provides a thorough understanding of level term life insurance, its workings, alternatives, and key considerations for potential buyers. If you have any further questions or need personalized advice, feel free to reach out.
