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 they’ll be. 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.
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.
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.
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.
