Level term life insurance policies are a type of term policy in which the premium and death benefit remain the same for the length of the term. Purchasing a level term life insurance policy may be a great way to secure life insurance at a set rate for a predetermined period of time, but this kind of life insurance may not always be a perfect fit. Bankrate’s insurance editorial team breaks down level term coverage to help you decide if it could be the right policy type for you.

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What is level term insurance?

There are multiple types of term life insurance policies. Rather than covering you for your entire lifespan like whole life or universal life policies, term life insurance only covers you for a designated period of time. Policy terms generally range from 10 to 30 years, although shorter and longer terms may be available. Level term life insurance policies maintain the same death benefit level and premium level over the life of the policy.

When applying for a policy, you will specify and list your chosen beneficiaries. You will also select an amount for the death benefit and a length for the policy — for example, you might choose a 10-year term with a $100,000 death benefit. If you pass away during the policy term, your beneficiaries receive the death benefit from the policy, provided all terms of the policy have been met.

How does level term life insurance work?

Level term life insurance generally comes with several policy term options, usually ranging from 10 to 30 years. However, longer and shorter policy terms may be available depending on the carrier. Level term life insurance policies may be further customized with add-ons called life insurance riders. For instance, with a waiver of premium rider, you may be able to pause your premium payments if you become critically injured, disabled or ill.

Once the term ends, policyholders have a few options as to what happens next. Most commonly, the policy expires. If you want to maintain coverage, a life insurer may offer you the option to renew the policy for another term. Or, your insurer may allow you to convert your term plan to a permanent policy. If you added a return of premium rider to your policy, you would receive some or all of the money you paid in premiums if you have outlived your term.

Is level term life insurance right for me?

Term life insurance may be the right coverage choice for life insurance shoppers in a variety of circumstances. Many people choose to purchase level term life insurance when they know they only need coverage for a set period of time or are entering a financially significant time in their lives. For example, people taking out mortgages may decide to buy a term policy that lasts until their mortgage is paid off. People with children may take out a term policy that lasts until their children are out of school or financially independent.

Level term life insurance may be the best option for those who want coverage for a set period of time and want their premiums to remain stable over the term. This may apply to shoppers concerned about the affordability of life insurance and those who do not want to change their death benefit.

Pros and cons of level term insurance

A level term policy may be one of the more popular types of life insurance, but that does not mean it is best for everyone. The stable premiums and death benefit may be appealing to some families, but there are some potential drawbacks to be mindful of before opening a policy.

Pros Cons
Death benefit remains stable throughout the policy May be stuck with a higher premium if you are in poor health when you open the policy
If you get an affordable premium, that rate is locked in for the duration of the term You could end up paying for more coverage than you actually need if your financial circumstances change

How much does level term life insurance cost?

Broadly speaking, level term life insurance is one of the cheapest life insurance policies you can buy. Compared to permanent life insurance, term policies tend to cost policyholders much less. That is because term policies are not guaranteed to pay out, while permanent policies are, provided all premiums are paid. Level term life insurance is typically more expensive than decreasing term life insurance, where the death benefit decreases over time.

Aside from the kind of policy you have, there are several other factors that help determine the cost of life insurance:

  • Age: Older applicants generally have a higher mortality risk, so they are typically more expensive to insure. This is why many term life insurance companies have an age limit (typically 80 years old) for term life applicants. On the flip side, you may be able to secure a cheaper life insurance rate if you open the policy when you’re younger.
  • Health: Similar to advanced age, poor health can also make you a riskier (and more expensive) candidate for life insurance. However, if the condition is well-managed, you may still be able to find affordable coverage.
  • Gender: Men statistically live shorter lives than women, so they usually pay slightly higher life insurance premiums as a result. However, health and age are typically much more impactful premium factors than gender.
  • Lifestyle and job: High-risk hobbies, like scuba diving and skydiving, may lead you to pay more for life insurance. Similarly, high-risk jobs, like window cleaning or tree trimming, may also drive up your cost of life insurance.

Frequently asked questions

    • The best life insurance company and policy will depend on the person looking, their personal rating factors and what they need from their policy. Although life insurance quotes do not vary as much from carrier to carrier as home or auto insurance, comparing quotes may help you find the company that offers the policy type and riders you need at a price that aligns with your budget.
    • The first step is to determine what you need the policy for and what your budget is. Once you have a good idea of what you want, you may want to compare quotes and policy offerings from several companies. Some companies offer online quoting for life insurance, but many require you to contact an agent over the phone or in person. After the application process, if approved, your policy will typically become active as soon as you make the first payment.
    • A 10-year level term life insurance policy means that, as long as you pay your premiums, you will receive life insurance coverage for 10 years with the same premium and death benefit throughout the term. Should you pass away during the 10-year period your policy is active, your beneficiaries will receive that death benefit. Unless you choose to renew, extend or convert your level term policy into a permanent policy, your life insurance contract will expire after the 10-year period.