The world of life insurance is changing each and every year. The typical term life insurance that most people consider buying is actually called level term life insurance.
Its superiority and flexibility have made it the go-to choice for consumers and financial planners alike. Its cost is typically low and its benefits are high.
Below, you’ll learn exactly what level term life insurance is and different choices to consider when purchasing life insurance. You’ll also see sample rates and find out how to apply for the best level term insurance for you.
What Is Level Term Life Insurance?
Level term life insurance is a type of life insurance where the monthly premiums remain the same, or level, throughout the life of the policy. Because it is a term policy, it is only available for a certain amount of time, typically from 5 to 30 years.
Here are a few characteristics of level term life insurance.
- You can purchase coverage for 10, 15, 20, 25, or 30 years.
- Your monthly premium payment remains the same throughout the time you are covered.
- The death benefit, or payout, remains the same for the life of the policy.
- It is the most common type of life insurance.
Level Term insurance is now the most popular form of term insurance and quickly becoming the most popular form of life insurance. Nearly every company that offers some form of life insurance has a version of level term insurance. Now “level term life insurance” is often just referred to as “term life insurance”.
Level Term Life Insurance Policy Options
When purchasing level term life insurance policy you have generally four decisions to make that will affect your premium and coverage.
- Policy Length
- Death Benefit Amount
- Endorsements & Riders
- Choice of Insurer
Your first consideration when purchasing level life insurance policy is to choose the length of the term.
Decide before purchasing how long you would you like your life coverage to last.
Not all companies offer all lengths, but typical lengths include, 10, 15, 20, 25, and 30-year policies. The longer the term length the higher the cost.
To decide how long you need coverage, consider your financial situation. If you have young kids, and your spouse doesn’t work, for example, you may want to purchase a 20-year policy. With this policy, your family is covered until your kids are in their 20’s and able to provide for themselves.
Death Benefit Amount
The second consideration is the death benefit amount. How much insurance coverage would you like?
Many term policies start at about $100,000 and go up in bands of $50K and $100K up to several million dollar policies. The exact lower and upper limits will depend on the insurer. Obviously the more coverage you select the higher the premium.
Again, you should consider your financial situation and that of your dependents. If you were to pass away, what payout would your family need to live comfortably?
Endorsements and Riders
Most term policies offer a series of policy options that can be added to the given insurance contract. These riders allow for more variability and tailoring in your own life policy.
Some of the most popular riders include convertibility, accelerated death benefit, and the child insurance rider.
Convertibility riders allow you to convert your term policy into a whole life policy during the term.
An accelerated death benefit allows you to pull cash from the policy against the death benefit. This is helpful if you were to come down with a disease that required high medical costs.
A child insurance rider means that the policy will pay out if one of your children passes away.
There are other riders, and depending on which ones you select there may be costs associated with each.
Level Term Insurance Companies
The choice of which insurance carrier to purchase your policy from matters. Many insurers are more open to underwriting certain conditions, others offer lower pricing, and some have a much higher financial strength rating.
Speaking with a competent and experienced insurance agent can significantly assist you in choosing a given insurance company. There are numerous differences that exist from one company to the next, it really just depends on what your given situation is and your ultimate goal.
For example, someone who is in their 60’s with kids out of college will need a much different insurance policy than someone who is in their early 40’s with your kids. Insurance companies cater to each group differently.
Fill out our quote tool and give us a call to see what insurance company is best for you. We can compare over 20 companies to find the right one for you.
Level Term Life Insurance Rates
Term insurance is priced based on certain underwriting criteria combined with your age, sex, smoking status, and your overall health. These details, along with your selections on exactly what type of life insurance policy you need will combine to create a binding life insurance application.
Each of these components plays a major role in determining your monthly rate. However, the specific details of your health and past history are one of the aspects of pricing life insurance which is hardest to describe to clients. Be prepared to speak about your current and past medical conditions when you apply for a life insurance product.
Level Term Rates for Women
These are sample rates for a non-smoking, 40-year-old female in good health purchasing a 20-year level term life insurance policy.
|Death Benefit||Monthly Premium|
Level Term Rates for Men
These are sample rates for a non-smoking, 40-year-old male, in good health purchasing a 20-year level term life insurance policy.
|Death Benefit||Monthly Premium|
Other Types of Term Life Insurance
Life Insurance can roughly be broken down into two competing types, permanent life insurance policies (such as whole, universal, variable life insurance) and term life insurance.
Permanent policies are created to last for the insured’s entire lifetime and grow as an investment. These policies are pretty complex and come with lots of options and moving parts. They can assist in wealth creation as well as providing insurance if set up correctly.
Below, we’ll cover other types of term life insurance, so you can find the right policy for you.
About Term Life Insurance
Term Insurance is the exact opposite of permanent life insurance. It is considered a pure form of insurance with no investment component.
Consumers buy term life insurance in bands of time of guaranteed coverage – generally from 10 to 30 years in 5-year increments. The coverage only lasts during this period of time after which the insurance will likely no longer be needed.
The general concept with term insurance is that you spend less with the temporary insurance and invest the remaining funds in tax-free or tax-advantaged funds to come out ahead in the long run. The “buy term and invest the rest philosophy” stands in direct contrast to permanent life policies. Term insurance, due to its lower cost, also allows you to afford to buy more insurance.
About Decreasing Term Life Insurance
When you purchase a term life insurance policy, you have the option to choose between a level term policy or a decreasing term policy.
In reality, almost all term insurance these days is level term insurance and functionally speaking decreasing term insurance is almost not offered anymore.
Decreasing term insurance is insurance whose yearly premiums remain the same each year, but whose death benefit decreases at a small amount each year. In other words, the death benefit is less each year for the same amount of money.
Decreasing term policies can pair well with mortgages. However, in most cases, it’s still better to purchase a level term policy. The main advantage of decreasing term insurance is its ability to go down in tandem with your need for the coverage.
About Annual Renewable Life Insurance
The other common type of term life insurance is the annual renewable term policy. With this policy, the term is only 1 year, but you can renew each year for certain period of time.
This sounds great because of the flexibility of being able to cancel after any year. But the premiums actually increase each time you renew. This means you’ll end up paying more for the coverage than if you got a level term policy.
Compare Types of Term Life Insurance
In this table you can see how all 3 types of term policies are different.
|Policy Type||Level Term||Decreasing Term||Annual Renewable Term|
|Death Benefit||Remains level||Decreases over time||Remains level|
|Premiums||Remains level||Remains level||Increases as you renew yearly|
|Term Length||Typically 10 to 30 years||Typically 10 to 30 years||1 year, option to renew yearly for a specified number of years|
How to Find the Best Level Term Life Insurance
The best level term life insurance policy is one that suits you and your family’s needs, with the most coverage for the appropriate length of time combined with the lowest yearly premium.
In other words, it depends on your situation – there is no universally best life insurance.
For some consumers, the best level term policy will be a no medical exam policy solution that can be bound in three days. For others, it may be a $2 million dollar term policy that is specifically catered towards a client that has asthma. Each family has unique needs and circumstances.
How To Apply For Level Term Life Insurance
Applying for term insurance has quite simply – never been easier. Start off by getting a quote using our quote tool. Input your information and choosing both a coverage amount and selecting a term length. Then give call us so that we can help you compare companies and policies.
The decision to purchase level term life insurance is a simple one. It’s low cost, simple structure, and industry competition makes it a great choice for families and couples across the country. For most Americans, its low cost and convertibility make level term life insurance the perfect choice.
Spectrum Insurance Group is made up of professional life insurance agents who are licensed in all 50 states and the District of Columbia. Spectrum Insurance Group has helped 1000’s of people purchase life insurance online & over the phone.
All content on this site has been written by life insurance experts & licensed life insurance agents.