Level term life insurance is a term life insurance policy that has a level death benefit and level premiums for the entire time the policy is in effect. This means that your premium payments won’t change and your beneficiaries will receive a guaranteed payout regardless of when you die, as long as the policy is active. When people talk about “traditional” or “normal” term life insurance, they usually refer to level term life insurance.
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How does level term life insurance work?
What makes level term life insurance unique is that its premium and death benefit never change — they stay the same throughout the entire duration of the policy.
Other than that, level term life insurance works like other term life insurance policies.
Pros and cons of level term life insurance
Pros
It’s the cheapest form of life insurance for most people. Level term life is many times more affordable than a comparable whole life insurance policy.
It’s easy to manage. Level term insurance is low maintenance and doesn’t require much upkeep — 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, and 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.
It comes with level premiums. Paying the same for the entire duration of your policy can be great if you buy it while young and in generally good health, locking in a cheap rate. But since the cost of life insurance is closely linked to your health profile and lifestyle habits, you may be paying higher premiums for the entire duration of your policy if you, for example, still smoke but are planning to quit, or if you were recently diagnosed with a health condition that can be managed with treatment.
How much does level term life insurance cost?
A 30-year-old who doesn’t smoke and is generally in good health can expect to pay less than $26 per month for a level term life insurance policy with a duration of 20 years and a death benefit of $500,000.
Rates for term life insurance will vary for each individual, based on variables like your age, health, medical history, and other risk factors, such as your hobbies and driving record.
Average level term life insurance rates
Age | Gender | $250,000 coverage amount | $500,000 coverage amount | $1 million coverage amount |
20 | Female | $15.01 | $22.66 | $33.63 |
Male | $19.19 | $30.20 | $47.61 | |
30 | Female | $15.17 | $22.99 | $36.90 |
Male | $18.19 | $29.33 | $48.88 | |
40 | Female | $21.66 | $35.27 | $60.64 |
Male | $25.38 | $42.94 | $75.25 | |
50 | Female | $43.92 | $78.30 | $139.47 |
Male | $56.69 | $102.50 | $188.26 | |
60 | Female | $107.84 | $194.16 | $354.64 |
Male | $149.38 | $268.09 | $500.17 |
Methodology: Rates are calculated for male and female non-smokers in a Preferred health classification obtaining a 20-year $250,000, $500,000, or $1 million term life insurance policy. Life insurance averages are based on a composite of policies offered by Policygenius from Banner Life, Brighthouse Financial, Corebridge Financial, Foresters Financial, Haven Life, Lincoln Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, Symetra, and Transamerica. Rates may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 07/01/2023.
As you can see in the rate estimates above, even for affordable level term policies, the cost of life insurance increases with age, rising an average of 4.5% to 9% per year.
The older you are at the end of your term has an impact, too. This is why, for example, it’s much more expensive for a 50-year-old to apply for a 30 year term that would cover them until age 80, than it would be for a 30-year-old to get the same coverage until age 60.
If you need life insurance, buying sooner, when you’re younger (and likely healthier) can lock in lower rates for decades.
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.
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Alternatives to level term life insurance policy
Level term is the cheapest, most convenient 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.
Whole life insurance is a type of permanent life insurance that doesn’t expire — meaning that no matter when you die, your loved ones will receive a guaranteed lump sum of money (the death benefit). Unlike term life policies, whole life includes a cash value savings component you can access while you’re still alive. The cash value earns interest at a fixed rate set by the insurer. Similar to level term life, traditional whole life insurance policies also come with level premiums, so you know from the start how much you’ll pay for the entire duration of the policy. While whole life is significantly more expensive than term life, it can be a good option for high-net-worth individuals with complex coverage or estate planning needs, or people who have dependents who require lifelong care.
Group term life insurance coverage may be offered through your employer for free or at a subsidized rate as part of your benefits package. You should sign up for group term insurance if it’s offered by your employer, but you’ll rarely get enough coverage from a group policy — and you can’t keep it if you leave your company. But this can be a good option if you only need a low coverage amount or you currently can’t fit your own private term life insurance policy into your budget.
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.
Should you get a level term life insurance policy?
If you have financial responsibilities like a spouse, children, or mortgage, level term life insurance is likely a good fit for you.
Alternatively, if you’re young and know that you’re working toward those milestones in the future, it can be a good idea to apply now and lock in cheap premiums.
With a level term life policy, you can secure cheap rates for the next 10 to 30 years. This means that regardless if you have any changes to your health, your rates won’t change unless you cancel the policy and apply for a new one.
Frequently asked questions
How does level term life insurance work?
You pay a premium for coverage that lasts for 10 to 30 years. If you die during that period, the insurer pays a tax-free death benefit to your beneficiaries. The premium and death benefit never change. If you outlive the policy, it expires and you stop paying premiums.
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 its most common form.
Does level term life insurance have a cash value?
Level term life insurance doesn’t have a cash value. It simply offers basic protection in the form of the death benefit — a tax-free lump sum of money your beneficiaries receive if you die while the policy is active.
Do you get your 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. There are return-of-premium options on the market, but they’re not cost-efficient.
Is level term life insurance cheap?
Level term life insurance is one of the cheapest life insurance policies on the market. Term life in general is many times cheaper than whole life policies.
What is the difference between level premium term life insurance and level benefit term life insurance?
These two terms can refer to the same product. Level premium means that your rates stay the same, and level benefit means that your death benefit, or your coverage, remains the same throughout the duration of your life insurance policy. In most cases, level term life policies come with both.
