What Is Level Term Life Insurance?
Level term life insurance guarantees fixed premiums for as long as your policy is in place. Your rates will not go up.
Likewise, the death benefit amount — or the money your family receives if you die — stays consistent over time.
When people talk about term life insurance — or policies that last for a specific period, such as 10, 20 or 30 years — they’re usually referring to a level term policy. This is the most popular type.
Term policy benefits expire when the term ends, and there’s no buildup of cash value.
If you don’t renew your life insurance at the end of its term, coverage lapses, and your beneficiaries will not receive payment from the insurance company if you die.
This contrasts with permanent life insurance, which never expires but comes with higher monthly premiums.
There are other, less popular types of term life insurance, such as decreasing term, where the death benefit gradually declines each year the policy is in place. Alternatively, an increasing term policy includes a death benefit that grows larger over time.
Finally, renewable term life allows you to extend the term without having to reapply for new coverage.
Benefits of Level Term Policies
Level term life insurance offers several key benefits, including affordability and consistency.
- Affordable Coverage
- Term life insurance policies are more affordable than permanent life insurance options, even for the same death benefit coverage amount.
- Stable Premiums
- One of the most attractive features of level term policies are fixed premiums. There are no surprises. You know exactly how much to pay each year or month for coverage.
- Consistent Death Benefit
- The amount of money your family receives when you die does not fluctuate. This can offer peace of mind that your beneficiary receives the amount of money you want.
- Simple Coverage
- Level term life insurance is easy to understand, with few extra fees or charges. These policy types are straightforward: The face amount of your contract is always equal to the death benefit.
What Happens When the Level Term Ends?
When your level term life policy expires, your coverage will end along with your payments to the insurance company.
You will not receive anything else from the insurer — and you’re no longer obligated to pay premiums.
If you want your coverage to continue, you have a few options.
For example, some policies offer a conversion feature, which allows you to convert to a permanent form of life insurance.
Or you may be able to keep your current policy in force by continuing to pay your premiums. You usually don’t need to undergo a new medical exam. This can be a good option if you cannot qualify for a new policy because of changes in your health.
However, if you do this, the cost to keep the policy in force will increase significantly.
You can also try to purchase a level term policy from a new insurance company. Keep in mind that a medical exam will likely be required and buying coverage when you’re older will always cost more.
How Much Does Level Term Life Insurance Cost?
The cost of level term life insurance depends on several factors, including your age and health at the time you purchase your policy.
The term length and coverage amount you select also plays a role.
According to Life Happens — a nonprofit organization focused on consumer life insurance education — a healthy 30-year-old man can expect to pay about $13 a month for a 20-year level term policy worth $250,000.
Many people think term life insurance costs more than it does. According to the 2018 Insurance Barometer study conducted by Life Happens and Limra, an insurance industry group, nearly half of millennials estimate the cost of term life insurance to be five times higher than the actual price.
5 Cited Research Articles
- Kinney, J. (2020, January 17). What Is Term Life Insurance? Retrieved from https://www.usnews.com/360-reviews/life-insurance/term-life-insurance
- American Council on Life Insurance. (2018, October 28). 2018 Insurers Fact Book. Retrieved from https://www.acli.com/-/media/ACLI/Files/Fact-Books-Public/07FB19FChap7LifeInsurance.ashx?la=en
- American Council on Life Insurance. (2018). What You Should Know About Buying Life Insurance. Retrieved from https://www.acli.com/-/media/ACLI/Files/Consumer-Brochures-Public/What_You_Should_Know_About_Buying_Life_Insurance.ashx?la=en
- LIMRA and Life Happens. (2018). 2018 Insurance Barometer Study. Retrieved from https://www.gpagency.com/wp-content/uploads/2018-Insurance-Barometer-Study.pdf
- Life Happens. (n.d.). What is the average life insurance cost? Retrieved from https://lifehappens.org/life-insurance-101/what-is-the-average-life-insurance-cost/