Level term life insurance
Level term life insurance is one of the most common types of life cover. "Level term" means the amount of cover provided by this type of policy stays the same throughout a fixed period of time (the "term"). This means that the payout your family receive if you die won't increase or decrease with the rate of inflation, or any other measure.
The "term" is a set period of time, usually between five and 40 years, which you choose when you take out the policy. As well as the payout, your monthly premiums stay the same throughout the term. If you survive the term your cover ends, so you would need to take out another life insurance policy if you still want to be covered after this time.
Who is level term life insurance for?
Level term life insurance could suit you if you want the security of knowing that your dependents would receive a set amount if you die during a particular period of time. For example, you may decide that you want to be covered for the years when your children are still living at home.
If you want a payout to cover a debt that reduces in size over time, such as a repayment mortgage, mortgage life insurance might be more suitable. If you choose this type of cover, your premiums will decrease along with the size of your payout.
Single or joint cover
When you buy level term life insurance you can specify single or joint cover. Joint cover means that the policy is designed to pay out if either you or your partner pass away during the term.
A joint policy usually costs less than two single policies, but there are two things to consider here:
- If one of you dies during the term the survivor will no longer have life insurance after the policy has paid out.
- If you both die at the same time during the term, joint cover will only pay out for one of you, whereas two single life policies would pay out for both.
Critical illness cover as an add-on
A life insurance policy will only pay out in the event of death, but critical illness insurance can pay out a lump sum if you are diagnosed with a critical illness during the term of your policy.
Many providers offer critical illness insurance as an extra when you take out a life insurance policy, so think about whether this is something you might need.
Before you take out a life insurance policy, you should make sure you're getting the best deal for your needs. Compare providers today and see what your monthly premiums will be; cover could be cheaper than you think.
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Last updated: 22 September 2015