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What is level term life insurance?

Level term life insurance is designed to pay out a cash sum if you die during the time your policy runs. The amount paid out is the same whether you’re near the start or end of your policy. It’s the simplest and most straightforward type of life insurance.

What does ‘level term’ mean in life insurance?

‘Level term’ means your premiums stay the same for the period your policy runs for – say 10, 20 or 30 years. In other words, the amount of cover is ‘level’.

As long as you keep up to date with your payments, your beneficiaries – for example your partner and children – should get a guaranteed lump sum payment. If you don’t die within the policy term, your beneficiaries won’t receive anything. In that case, you’ll have to take out a new policy if you want to continue to have the security of life insurance.

Do I need level term life insurance cover?

Think about whether your loved ones would struggle to pay their bills if you weren’t around any more. Level term life cover can give your family financial security when you’re gone.

The pay-out from level term life insurance can be used however your beneficiaries want. For example, it can help:

  • Cover a mortgage
  • Pay for school or university fees
  • Pay for everyday living expenses
  • Give your loved ones a nest egg
  • Pay for your funeral
  • Pay off personal loans and debts.

If you’re a single person with no dependants, you probably don’t need level term life insurance, although your situation could change in the future.

What are the benefits of level term life insurance?

The main reasons why you might choose level term life insurance are:

  • A set lump sum – level term insurance is useful if you want to make sure the people you love get a fixed lump sum of money so they’re supported if you die.
  • Fixed premiums – 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?

Level term life insurance won’t be right for everyone. Downsides include:

  • High premiums – premiums will usually be higher compared with decreasing term life insurance, where the pay-out amount drops over time. Typically, the younger you are when you buy level term cover, the cheaper it’s likely to be
  • No inflation – level term policies don’t take inflation into account. While the pay-out amount might seem more than adequate when you take out the policy, it might be worth a lot less 20 years on.

How much life insurance cover do I need?

Taking out too much life insurance could mean that your premiums are higher than you need to pay. On the other hand, underestimating the cover you need means your family might not be left with enough money to support them.

Consider these questions:  

  • What payments will your beneficiaries need to cover?
  • How much will they need to live comfortably?  
  • Will their own ability to earn be affected if you die? 

If you have a death in service benefit as part of your employment package, factor this in when deciding how much you want your term cover to be. But remember, you may lose this benefit if you change jobs as it’s not offered by all employers.

To help you figure out how much life insurance you might need, try our simple-to-use life insurance calculator. Working out the amount of cover you need will help you decide which type of life policy is right for you.

How long should my life insurance cover last?

That depends on what you want the cover for. You could choose life insurance based on how long your children might need financial support for if you were to die. Or you could take out cover that lasts as long as your mortgage.

Do I need to review my life cover during the term?

You should review your policy regularly to make sure it still meets your needs, especially if you’ve experienced any major life changes like marriage, new family members or divorce.

You should also check your policy is still right if you’ve had a substantial pay rise, moved up the property ladder or downsized.

What other types of policy should I think about?

  • Decreasing term life insurance: like level term insurance, you choose the length of time the policy runs for. However, with this type of insurance, the amount of money paid out falls throughout the term. It’s designed for people whose financial commitments will reduce over time: for example, those with a repayment mortgage.
  • Increasing term life insurance: with this type of policy, the pay-out goes up throughout the term to take inflation into account. That way, the value of the pay-out won’t diminish over time. Increasing term policies are usually more expensive than level or decreasing term policies, and premiums also go up while you have the policy, often every year.
  • Whole of life insurance: these policies 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, as long as you continue to pay your premiums.

There are other types of life cover to think about. For example, you could take out a joint life insurance policy with a partner. But this will only pay out once, on the death of the first policyholder.

You might also want to consider income protection insurance, which can pay out if you can’t work because you have an accident or are seriously ill.

If you’d like advice on life insurance, you can call our partners at LifeSearch on 0800 072 1147.

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How much does level term life insurance cost?

There are several things that can affect the cost of term life insurance, including:

  • Your age
  • The length of the policy
  • The amount of cover you want
  • Your height and weight
  • Your lifestyle – including how much you drink or if you smoke
  • Your medical history.

Taking a non-smoker aged 30-39 as an example, the average cost of term life insurance is less than £4.29 a month based on cover up to £175,000 over a 10-year term[1].

[1] 51% of non-smoking customers aged 30-39 could achieve a premium of £4.29 per month for level term life insurance for a 10-year term, up to £175k worth of cover and no critical illness cover. Based on Compare the Market data from March 2024.

What do I need to get a quote?

To get a quote online, just give us some details including:

  • Personal information like your date of birth
  • How long you want your insurance to last
  • The minimum amount of cover you’d like.
Start a quote

Or you can give the team at LifeSearch a call on:
0800 072 1147

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Saturday 9am to 2pm
Sunday 10am to 3.30pm

Frequently asked questions

Which type of term cover is best for me?

It depends on your circumstances and the type of financial commitments you want to cover. It could also depend on the type of mortgage you have. For example, decreasing term cover wouldn’t be suitable if you have an interest-only mortgage, as it wouldn’t cover the outstanding balance you need to pay back.

Can I have more than one life insurance policy?

Yes, it’s possible to have multiple life insurance policies. For example, you could have a policy to cover your mortgage and another policy to protect your children financially while they’re growing up.  

See more on having more than one life insurance policy.

What’s the difference between level term and decreasing term life insurance?

The main difference is the amount paid out. Level term life insurance provides a fixed pay-out if you die within the term of the policy. With decreasing term life insurance, the pay-out decreases in value over the term of the policy.

For example, a level term policy taken out for 25 years for cover up to £100,000 will pay out that sum, whether the policyholder dies within three years or 20 years. A decreasing term policy decreases in value over the term of the policy. The longer the policy lasts, the less of that £100,000 amount will be paid out if you die.

What happens when the term ends?

If you die after the policy expires, there won’t be a pay-out. If you still want life insurance once the term has ended, you’ll need to take out a new policy.

If you take out level term cover, you might be able to add an option to renew. This allows you to renew your cover at the end of the term, instead of arranging a new policy. There’s no need to undergo a health check either.

You need to add this option when you take out a new policy, not after it’s become active.

What happens if you outlive term life insurance?

If you outlive the term of your insurance, your loved ones won’t get a payment when you die. Some providers may allow you to extend the term of your policy, although it’s likely you’ll have to pay a higher premium.

But before you consider extending the policy, it’s worth considering whether you still need cover. It’s likely that your financial situation will have changed over the years. If your mortgage is paid off and your kids have grown up and left home, do you still need life insurance. If you do, do you need as big a pay-out?

Can I add critical illness cover to level term life insurance?

Most life insurance providers offer this as an option. Critical illness cover offers financial protection by paying out if you’re diagnosed with an illness listed in your policy.

Can I get level term life insurance with a pre-existing health condition?

Some pre-existing conditions won’t affect your ability to get life insurance. But others, such as cancer and heart conditions, will raise a red flag with your insurance provider and could make it more difficult to find a policy. It’s also likely to make your insurance more expensive.

How can I save on level term insurance?

There’s a few ways you might be able to cut the cost of your premium: 

  • Take out a policy when you’re younger and healthier – it’s likely to cost less than if you wait
  • Check to see if you’re already insured. For example, you might have death in service insurance through your workplace.
  • Get the right amount of cover - you don’t want to be underinsured, but nor do you want to find yourself paying for cover you don’t need
  • Stop smoking, vaping and using any tobacco products – you’ll pay more for your premium if insurance providers consider you to be a smoker.

What happens if I miss a premium or stop paying?

Typically, insurance providers will offer a grace period to allow you to catch up if you’ve missed a payment by accident. But if you don’t keep up your monthly payments the cover will end, and your policy won’t pay out if you die.

Will my family have to pay tax on the pay out?

This will depend on how much the pay-out is and how much your estate is worth. You can consider the option of putting your life insurance policy ‘in trust’. This is a relatively simple legal procedure that means its value won’t be counted as part of your estate, so will be protected from inheritance tax. However, the money should still go to the people you want to receive it. 

See more on writing your life insurance in trust.

Where can I compare quotes for term life insurance?

Right here at Compare the Market. The type of life insurance that’s right for you will depend on your own circumstances and needs. The cheapest quotes may not necessarily work for you.

Tim Knighton - Life, health and income protection insurance expert

"The fact that over 50s life insurance offers guaranteed acceptance is a huge benefit. You don’t need to worry about passing any health checks and you can make sure your beneficiaries are looked after. Just make sure that you plan for inflation, otherwise you might leave your loved ones short when they need" 

Learn more about Tim

Page last reviewed on 16 APRIL 2024
by Tim Knighton