What Is Level Term Insurance?

Life often comes with some uncertainty. That's why when we're offered certainty, it can be important to take it. When it comes to life insurance, a term policy could offer you just that.


In this article, we’ll go through what exactly is level term insurance. You’ll also get an insight into how this life insurance could benefit you and your loved ones.

What is Level Term Life Insurance?

A level term policy is a life insurance policy where an insurer will pay a fixed lump sum if the insured person was to die during the term of the policy and in some cases, a payout is made if the person insured is diagnosed with a terminal illness. This lump sum is agreed at the beginning of the policy upon application with the insurer. 

These policies generally stretch over a few years. When getting the insurance you make the choice on how long this is. Level Term Insurance can provide you with the certainty of knowing how much you will be paying during the policy.

How does Level term Insurance work?

Probably the best way to understand how this type of insurance works is with an example. So upon your application, you decide the length of time and the lump sum amount that will be paid. You could select an amount such as £150,000 and a time period such as 30 years. The insurer will then give you the amount of money that you will pay each month (this is often referred to as the premium). 

So, once all of these details are agreed, you are covered. If you were to pass away during this time period you will be paid the full amount. This payout amount will be the same throughout the life of the policy. 

What are some of the benefits of choosing level term insurance?

As we’ve mentioned before you agree how much you’ll be paying throughout the policy. So rather than worrying about any kind of price increase, everything will stay the same. This is, of course, as long as you keep paying your premiums.

Unfortunately, the costs of death can have a profound impact on those you care for the most. There can be a lot of expenses around passing away not to mention the day-to-day expenses. With level term life insurance, you can get a budget in place and know what's due in the event of your death. With it, you can plan ahead and help protect your loved ones.

What are some of the disadvantages of level term life insurance?

One of the disadvantages of level term insurance is that it doesn’t take inflation into account. As with any life insurance policy, inflation could have an effect on the value of the payout.

With level term life insurance, it's a fixed amount of money for a fixed amount of time. During the time span of the insurance period, the value of that benefit could be eroded. Buying power for things such as a funeral or even mortgage payments could be reduced. 

Is level term insurance right for you?

While it can seem good to know exactly what you will get and for how long you are covered, it might not be for everyone. Generally, people could use a life insurance benefit to pay off outstanding debts. Things like mortgages tend to be the most common. However, if you have a variable interest rate mortgage a fixed lump sum might not be the best option. As time goes on the amount that needs to be paid back would increase. 

If you happen to know exactly what will need to be paid back during the time period then level term insurance could be a good option for you. 

What other types of Term insurance are available?

Level term insurance might not be the only ‘term’ insurance you may have heard of. There are others that let you select a fixed term to be insured for. While similar, they do differ in some key ways so here is a short explanation of two of them:

Increasing Term: With this kind of term insurance the benefit amount increases over time. Generally, the rate at which it will increase is agreed at the start of the policy. This also means that your premiums increase too.

Decreasing Term: As you might have guessed, the benefit amount decreases over time. So you will start off with a higher benefit but it will decrease over time. The idea behind this is that it will decrease with large loans or a mortgage.

Level Term Insurance with Choozi

At Choozi we are 100% impartial. We search among the leading life insurance companies in the UK. So if you decide to search with us you will be sure that you are getting the best life insurance policy for you and your situation. All we need from you is a couple of details in an easy to fill out form. From there you have access to quotes that are suited to you and your situation. 


Compare, choose and buy life insurance with Choozi