What Does Level Term Life Insurance Mean?
Level term life insurance is a type of life insurance that provides a predictable death benefit to your beneficiaries during the policy term. The following are some benefits of level term life insurance:
| Benefits | Explanation |
|---|---|
| Predictability | You and your beneficiaries can make plans with a single dollar amount in mind. |
| Budgeting | Since level benefits often mean level premiums, budgeting can be easy. |
| Affordability | You can lock in a rate and coverage amount based on your current health. |
Annual renewable term life insurance is an alternative to level term insurance. These policies renew each year, with rates going up as you get older. While these policies typically have lower premiums in the first few years, the premiums for level term life are lower over the long term.
It is essential to note that premiums for level term life insurance are linked to your health. If you lock in a rate with your current medical history but aim to get healthier over the next few years, you could be paying a level but inflated price for all the years. In this case, you might be better off getting an annually renewable policy for a shorter period of time.
Decreasing term life insurance is another type of life insurance with a decreasing death benefit. The payout goes down over time, which means that the coverage will drop as well. Decreasing term life insurance is often less expensive than level term life insurance because the payout goes down.
If you want to increase your policy, you might need to reapply. That means new forms, a new life insurance medical exam, and the whole process repeated to make sure you’re not too risky to qualify for more coverage. Decreasing your coverage is much easier. Usually, there’s a form you’ll need to fill out, and your insurer will issue you a new payment plan. That’s it.
If you want a more automated approach to coverage reduction, you could “ladder” your term insurance policies instead. With laddering, you stack up term policies to get to the total coverage you need, which lowers your overall premiums, as shorter policies are often cheaper.
Level term life insurance is an excellent option for those who want a predictable death benefit, easier budgeting, and affordable premiums. However, it is essential to consider the alternatives and choose the right type of life insurance that meets your specific needs.
