Level term life insurance

What is level term life insurance?

Level term life insurance pays out a guaranteed lump sum if you pass away during the term of the policy. The payout stays the same throughout your policy’s term. And so do your monthly payments.

When you apply for cover, you'll need to choose:

• The size of the payout
• Your beneficiaries
• The amount of time you're covered for (the term)

If you outlive the term of your insurance, you’ll stop paying the premiums and your beneficiaries won’t get a payment when you eventually die.

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.

Benefits

• You get a fixed lump sum that stays the same throughout your policy term, so you know exactly how much your beneficiaries will get

• Your premium will stay the same throughout the length of the policy (unless you make any changes)

• Provides financial peace of mind – can help cover your mortgage, bills, school fees and generally helps prevent financial disruption to your loved ones’ lives

Drawbacks

• Premiums will cost more than a decreasing term life insurance policy

• The older you are when you buy this type of cover, the more expensive your premiums will be

• They’re rarely index linked (payout rises in line with inflation), which means you’ll have to try and factor in inflation when you’re working out how much cover to get

• If you don’t die during the term, there’s no payout

Level term and decreasing term life insurance: key differences

Level term insurance has a fixed payout amount, regardless of when in a policy term a claim is made.

With decreasing term insurance, the payout reduces over time throughout your policy term. Because of this, it’s usually taken out to cover outstanding debts – things like you mortgage.

Alternatives to level term insurance

As well as level and decreasing term policies, the following cover options may also be worth considering:

Whole of life

There’s no policy term with whole of life cover, which means it'll pay out a fixed amount no matter when you die. But for that reason, it can be a more expensive option.

Joint policies

If you have a partner that’s looking to get life insurance, it might be worth comparing the price of two single policies with joint cover. 

Joint policies tend to be cheaper. Reason being, and something to keep in mind, that a joint policy only pays out once, even if both of you die.

Family income benefit

A type of life insurance for parents and families, family income benefit pays out monthly tax-free instalments to cover the cost of a lost income for a set period of time.