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Policy Types

Understanding level term life insurance

Level term life insurance is one of the easiest paths into life insurance, we’ll discuss the benefits and drawbacks so that you can choose a plan to fit your needs.

Level term life insurance is the most common and basic form of term life. When you’re looking for temporary life insurance plans, level term life insurance is one route that you can go.

What is level term life insurance?

Most of the time, level term life insurance is the most straightforward and cost-effective life insurance option because it has the most simplistic structure. You’ll keep the same premium for the duration of your policy, whether it be five, 10, 20, or 30 years. With level term, the death benefit remains "level" or unchanged throughout the life of the policy.

What are some benefits of level term life insurance?

  • It’s the most inexpensive form of life insurance for most people
  • You don’t have to worry about your premiums going up during the life of your policy
  • The death benefit is consistent throughout the life of the policy
  • Its simple structure makes it easier to manage

What are some potential drawbacks of level term life insurance?

  • Your premiums aren’t refunded if you outlive the life of your policy
  • There’s no cash value in a level term life insurance policy
  • You may need to buy a new, more expensive policy later

How does level term life insurance work?

Aside from the fact that your premium and death benefits remain the same for the duration of your policy, level term life insurance operates very similarly to other life insurance policies. Here’s a rundown of how it all works:

  • Select the coverage amount you’ll need and the term length you want. These factors along with your age and health will help calculate the premiums for your level term life insurance policy.
  • Choose a frequency to pay your premiums, typically monthly or annually.
  • If you pass away while your policy is in force, your beneficiaries will typically receive a tax-free death benefit.
  • If you outlive your level term life insurance policy, you can reapply for another policy.

What happens when you apply for level term life insurance?

The application process for level term life insurance is typically very straightforward. You’ll fill out an application that contains general personal information such as your name, age, etc. as well as a more detailed questionnaire about your medical history. Depending on the policy you’re interested in, you may have to participate in a medical examination process. However, many companies offer policies with no medical exams required. Once your application is processed and accepted, you’ll sign and begin paying your premiums.

What to expect during your policy

Because maintaining a level term life insurance policy is simple, it requires little to no maintenance on your part. All you need to do is maintain your premiums for the life of your level term life insurance plan, and you’re all set. You may find it worth your time, however, to periodically assess your level of coverage to determine if it is appropriate for your current situation.

What happens at the end of your level term life insurance policy?

At the end of your term, your policy will expire, leaving you with a handful of decisions to make. You may have the option to convert into a whole life policy, which can last for the duration of your life, but it’s significantly more expensive than your previous level term life insurance policy. You could also begin a new level term life insurance policy, you’ll just have to go through the application process again.

Can you cash in a level term life insurance policy?

The short answer is no. A level term life insurance policy doesn’t build cash value. If you’re looking to have a policy that you’re able to withdraw or borrow from, you may explore permanent life insurance. Whole life insurance policies, for example, let you have the comfort of death benefits and can accrue cash value over time, meaning you’ll have more control over your benefits while you’re alive.

How does level term life insurance compare to other types of life insurance policies?

Level term life insurance vs. decreasing term life insurance

You may be wondering, is it better to get a level term or decreasing life insurance policy? Decreasing term life insurance and level term life insurance are effectively the same, with one key difference. While level term life insurance allows you to receive the same death benefit on the first day as the last of your policy, the payout for decreasing term life insurance continually falls as the policy gets older.

Level term life insurance vs. whole life insurance

While level term life insurance provides a steady premium and death benefit for the entirety of the plan, it doesn’t offer many financial benefits while you’re alive. It also has a set expiration date, requiring you to apply again to extend your policy. This can include new medical examinations, underwritings, and more.

If you’re seeking a policy that can benefit you while you’re alive, you might look into a whole life insurance plan. With a whole life insurance policy, you will still have level premiums, but you’re often able to borrow against your cash value to cover immediate costs or allow it to accrue at a fixed interest rate over time while retaining your death benefit coverage for the rest of your life. It's important to note that unpaid loans will reduce the death benefit by the outstanding balance and interest.

The biggest differences between level term life insurance and whole life insurance are how long you’ll be able to retain your coverage, whether or not you can borrow against your plan, and the cost of your premiums.

How can I customize my level term life insurance?

It’s important to have a level term life insurance policy that’s tailored to your exact needs so that you can have the comfort of knowing that your affairs will be properly taken care of even after you’ve passed away. With level term life insurance policies, you may be able to customize by adding riders to your plan. Riders are optional provisions added to your policy that can give you additional benefits and protections.

Riders are a great way to add safeguards to your policy. Anything can happen over the course of your life insurance term, and you want to be ready for anything. By paying just a bit more a month, riders can provide the support you need in case of an emergency. Some of the most common policy riders are:

Wavier of premium rider

If you become totally disabled, this rider allows you to stop paying premiums and continue your policy until you’re able to return to work.

Children’s term rider

This rider provides term life insurance on your children through the ages of 18-25. There are instances where these benefits are built into your policy, but they can also be available as a separate addition that requires additional payment.

Accidental death benefit rider

This rider provides an additional death benefit to your beneficiary should you die as the result of an accident. This cost-effective option may be worth considering if you work in a potentially hazardous occupation, or you’re simply concerned about accidental death.

Get a level term life insurance quote

If you’re ready to start planning for your future, get a free term life insurance quote from Protective today.



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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective or its subsidiaries.

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