What Is Level Term Life Insurance?
By definition, level term life insurance is a term life policy guaranteed to have the premium remain the same for the duration of the contract. This is what most people refer to as term life. Purchased for a set number of years (5, 10, 30 years, for example), the premium and the death benefit remains the same (level) until the end of the term, or can be canceled at any time.
2 key takeaways:
The premium rate for the policy stays the same (level) for the entire life of the policy
The death benefit also stays the same
How does Level Term Life Insurance work?
Choose a policy, death benefit amount and term period - the cost of the policy is dependent on the applicant’s health and age.
Pay premiums monthly or annually.
If the policyholder dies during the policy term the death benefit is paid out to the beneficiaries in a tax-free lump sum of money.
If the policyholder outlives the policy, the policy expires and stops making premium payments.
What Happens at the End of Level Term Life Insurance?
Some options after level term life insurance ends are:
Purchase a new level term policy
Convert your term policy to a permanent life insurance policy. A permanent policy will last your entire life, but can be more expensive than term policies.
What’s the Differernce Between Level Term and Whole Life Insurance?
Term life policies expire, while whole life policies last as long as you pay premiums
Whole life policies have a cash-value component that can grow over time