You may have heard about term life insurance. But what about level term life insurance?
Is it the same thing or are they different?
What is Level Term Life Insurance?
When people mention level term life insurance, they are talking about the most common type of term life insurance coverage. In this kind of coverage, the death benefit as well as the premium are the same for the entire life of the policy.
The alternate to these policies are known as annually renewable term policies. With these, you have to renew the policy each year and the premium goes up as you get older.
Level term policies are not permanent. They only last for the term length of the policy. That may be anywhere from 5 years to 30 years. The longer the policy, the higher the premiums.
If the policy holder passes during the term of this policy, then the death benefit is paid to their beneficiary. If they do not, then the death benefit will not get paid out.
Some level term policies allow the policy holder to renew the policy at the end of the term. If you do this, however, the fees may be much higher than the original policy.
Many people favor the level term life insurance because it is more affordable than other types of life insurance policies. It is also easy to understand. You know exactly how much it costs every month, how much your family will receive as a death benefit, and how long the policy lasts.
Benefits of Level Term Life Insurance:
- Fixed monthly premiums
- Guaranteed death benefits within a specific timeframe or term
- More affordable type of life insurance policy
However, there are also potential risks in this type of life insurance. Check them out below:
- More expensive premiums for longer coverage (20-year, 30-year term policies)
- If you surpass your term life insurance, your policy expires, so will your coverage.
- Higher premiums for older individuals
- Level term life insurance has no cash value
- Failure to pay your premiums will result to forfeiting your coverage