What Is Level Term Life Insurance?
Level term life insurance, the most common form of term life insurance, is a life insurance policy that gets straight to the point. It’s similar to regular term life insurance in that it provides pure life insurance coverage when you need it with none of the frills of whole life insurance, such as forced savings components. Level term life insurance has a guaranteed level premium, and you aren’t required to annually renew the policy. The insurance premium stays the same for a set period of time – the length of time for which the policy is in effect (usually 10, 15, 20, or 30 years). The longer the policy is in effect, the higher the annual premium will be. For example, if you purchase a level term life insurance policy for 10 years, you’ll pay lower premiums than you’d pay if you purchase level term life insurance for 30 years.
The reason for this is you’ll get much older during the course of a 30-year policy than you’ll get during the course of a 10-year policy, and life insurance companies view older individuals as more risky to insure. If you purchase a 10-year policy when you’re 30 years old, you’ll only be 40 years old when the policy expires; however, if you purchase a 30-year policy when you’re 30 years old, you’ll be 60 when the policy expires. It costs more to insurance a 60-year-old than it costs to insure a 40-year-old. Make sense? Level term life insurance policies normally include renewal options. This means you can renew your policy at a maximum guaranteed rate if you choose to extend the term of insurance coverage.
This option is usually only implemented if your health has greatly deteriorated during the original term of insurance coverage. If level term life insurance sounds right for you, begin your search now and make your purchase as early as possible to ensure the lowest premiums possible.