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What is level term life insurance?

Level term life insurance is a type of insurance that pays out a cash sum if you pass away - and the sum paid out is the same whether you are near the start or end of your policy.

The agreed period of your level term life insurance policy is called the ‘term’ and the pay-out you’ll be eligible for is agreed up-front when you take out your policy.

So, as long as you keep up to date with your payments, your beneficiaries will receive a guaranteed lump sum payment. If you don’t pass away within the policy term, then you and your family won’t receive a pay-out from level term life insurance. In that case, you will have to take out a new policy if you want to have the security of life insurance.

Frequently asked questions

What is the difference between level term and decreasing term life insurance?

Level term life insurance is a fixed payment upon death, for a fixed period. For example, a level term policy taken out for 25 years and £100,000 will always pay out that full sum, if the policyholder dies within three years or 20 years. 
A decreasing term policy does exactly that, it decreases in value over the term of the policy. The longer the policy lasts, the less of that £100,000 will be paid out upon death. For example, if you die five years into the policy, it may pay out £90,000 from that original £100,000 policy. Whereas, if you died 25 years into the policy, it may only pay out £10,000, from the original £100,000. 

What are the benefits of level term life insurance?

Level term insurance is useful if you want to ensure your loved ones get a fixed lump sum of money so they’re supported if you were to pass away. This can be used to pay off part or all of a mortgage, school or university fees, personal loans and debts, or even your own funeral costs. Another benefit is that your premium will stay the same throughout the length of the policy, unless you make any changes to your policy.

What are the drawbacks of level term life insurance?

Because level term insurance gives you the security of a fixed sum of money, premiums will usually be higher compared to other life insurance policies. Generally speaking, the younger you buy this type of cover the cheaper your premiums are likely to be.

What happens if you outlive term life insurance?

It’s important to be aware of when your life insurance policy is nearing its end. Generally, if you outlive the term of your insurance, you will no longer receive a payment upon your death. If you’d like to extend the term of your policy, some providers will be able to arrange that, although it will likely come at a higher premium. 
You should consider whether it’s worth renewing, once you’ve outlived your original term, as your financial situation may have changed considerably since taking out the original policy. If a mortgage is now paid off, or any children are grown up and independent, you may no longer have need for life cover. 

What other types of policy should I think about?

Decreasing term life insurance, for example, is similar to level term policies – in that you choose the length of time the policy runs for. However with this type of policy, the amount of money paid out reduces throughout the term of a policy. It’s designed for people whose financial commitments will reduce over time, for example, if you’re repaying a mortgage, the amount of money needed to cover the mortgage will naturally decrease as you pay it off.  

Another option is a whole of life policy – these tend to have higher premiums than decreasing or level term payments. That’s because (as the name implies) the policy is guaranteed to pay out whenever you die – so long as you continue to keep up with your policy premiums.  

For more information on whole of life policies, call our advisors at Life Search on 0800 072 1147 (Mon-Thurs: 8am - 8pm, Fri: 8am - 7pm, Sat: 9am - 2:30pm and Sun: 10 am - 3.30pm). They're really friendly and just at the end of the phone to help you figure out just what you need.

There are other types of life cover to think about as well. For instance, you could take out a joint life insurance policy with a partner. But this will only pay out once, and it’ll be on the death of the first policyholder.

How much cover do I need?

We’ve developed a simple-to-use life insurance calculator to help you figure out how much insurance you might need. The amount of cover you need will help you define which policy type is right for you. Taking out too much could mean that your premiums might be higher than you’re prepared to pay. But underestimating the cover you need means your family might not be left with enough money to support them in the future - so think carefully about the amount you’ll need to protect the ones you care about most.

Where can I compare life insurance quotes?

The type of life insurance that’s right for you will depend on your own circumstances and needs. The cheapest quotes may not necessarily be what works for you. But it can be really quick to compare, so why not get a life insurance quote and see if you could save? uses cookies to offer you the best experience online. By continuing to use our website, you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacy & cookie policy.