Level Term Life Insurance
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Level Term Life Insurance Definition
Level term life insurance is a form of term life insurance that lasts for a set amount of time – the term – before expiring. The premium paid for this policy remains level, guaranteed to not increase during the term. Level term life insurance is an affordable, straightforward form of life insurance and is what most people picture when they think of buying life insurance.
How It Works
- Level term life insurance policies are usually sold in 10-, 20-, or 30-year terms.
- Premiums are paid monthly or annually to keep the policy in effect.
- If the policyholder dies during the policy term, the death benefit, a tax-free lump sum of money, is paid out to named beneficiaries.
- If the policyholder outlives the policy, the policy expires and the policyholder stops making premium payments.
| Level Term Overview | Annual Renewable Life Insurance Overview | |
|---|---|---|
| Duration | 1-30 years | 1 year, renewable for set number of years |
| Guaranteed Death Benefit | Yes | Yes |
| Guaranteed Cash Value | No | No |
| How Cash Grows (or Shrinks) | - | - |
| Premiums | Guaranteed to remain level | Increases each year policy is renewed |
| Notes | Best option if you'll need coverage for a number of years | Cheaper initially, but more expensive later. Best for short coverage period |
The easiest way to get life insurance
Cost of Level Term Life Insurance
Level term is the most basic form of term life insurance and usually offers the most affordable rates over the course of a 20- or 30-year term. Additionally, most insurers offer a slight discount for paying premiums annually instead of monthly. Here are sample rates for a 20-year level term life insurance policy:
| Annual Payment | Monthly Payment | |
|---|---|---|
| $100,000 | $105/ year | $19/ mo |
| $250,000 | $150/ year | $13/ mo |
| $500,000 | $240/ year | $21/ mo |
| $1,000,000 | $425/ year | $37/ mo |
Riders
Riders are modifications a policyholder can make to their level term life insurance policy to tailor it to their needs. Riders may come at an additional cost or may be provided by the life insurance carrier for free. Popular riders for level term life insurance policies include:
Accelerated death benefit rider
- Allows the policyholder to access the death benefit early in to pay for medical expenses in the case of terminal illness.
Waiver of premium rider
- In the event that the policyholder becomes temporarily disabled and is unable to work, the premiums payments will be waived until the policyholder has recovered.
Term conversion rider
- Converts the term life insurance policy to a permanent life insurance policy that remains in effect even after the term has ended.
Long-term care rider
- Like an accelerated death benefit rider, this allows early access to the death benefit to pay for long-term care like a nursing home or private nurse.
Child riders
- Provides small coverage amounts for children as an alternative to buying a full life insurance policy for them.
Other Types of Term Life Insurance
The premiums paid will be returned, minus any fees, to the you if you outlive the policy.
If you would rather avoid the medical exam that normally takes place to set your premium rates, you can opt for a No Medical Exam policy, such as an Accelerated Underwriting or Simplified Issue policy, which allow qualified applicants to skip the medical exam.
Mortgage life insurance is usually offered in 15- or 30-year increments to line up with your mortgage. To that end, the beneficiary is usually the mortgage lender and the death benefit gradually decreases to match your remaining mortgage balance.