Level Term Life Insurance
When you are in the market for a life insurance policy that provides affordable coverage at a consistent rate, level term life insurance may be exactly what you are looking for. What exactly is level term life insurance, and how can it benefit you? Here are the basics of level term coverage.
How it Works
Level term life insurance is a type of insurance coverage that provides you a death benefit in exchange for your premium payments. You aren’t paying for a cash value component, investment fees or anything else that typically comes with other forms of life insurance. Instead, you give a specific amount of money for a certain term of coverage. If you die within that term, the insurance company will pay the face value of your policy to the beneficiaries that you specified. If you outlive the term of the policy, it will expire. You may also have the option of renewing the policy after it expires.
With level term life insurance, you know exactly how much your premiums are going to be for the life of the policy. For example, if you get a 20 year term policy, the insurance premium will be the same every month for a period of 20 years. After the 20 years is up, the insurance company can allow you to renew the policy while changing the premium amount. Typically, your premium amount will go up after the term of the policy expires, since you will be older than you were when you took out the policy.
Compared to Annual Renewable
Another common type of term life insurance that is sold by insurance companies is annual renewable coverage. With this type of coverage, the insurance company only guarantees the premium amount for a period of one year. Then, at the end of each year, the insurance company will underwrite the policy all over again. With this type of policy, your premium amount could change from one year to the next. In most cases, your policy premiums will continue to go up every year. With level term insurance, you don’t have to worry about this, because you have the price locked in for an extended period of time.
Term of the Policy
When you get a level term life insurance policy, the premiums that you have to pay will go up when you get a longer term. This is due to the time value of money, and because the likelihood of you pass away during the term of the policy increases. For example, if you are comparing rates between a 10 year, 20-year term, and a 30-year term policy, you will have to pay more for the 30-year policy premiums. This means that you have to take into consideration how long you need coverage for when buying your policy. This way, you won’t pay any more than you need to pay for the coverage that you want.
Guaranteed Maximum Renewal
At one of the nice things about getting a level term life insurance policy is that the insurance company may offer you a guarantee of the maximum rate that it can charge for a renewal. For instance, if your policy expires, and you have to renew it, you will only have to pay a maximum amount that was given to you in writing when you took out the policy. The nice thing about this feature is that you know exactly what to expect when it comes to renewing your policy. This means that the insurance company also has to guarantee to renew the policy as long as you pay the amount that they request. This protects you against changes in coverage if you develop high risk health problems between when you took out the policy and when it expired. If you cannot qualify for a new policy once your old one expires, this can be an easy way to get the coverage that you need.
If you are buying a new level term life insurance policy, you should check the terms to see if evidence of good health is required to renew. If it is required, then you may want to check with another insurance company to get a different policy that does not require a medical evaluation when it comes time to renew. This can help protect your financial interests, if you are unsure that you will be able to pass a health exam.
When you are buying level term life insurance, you may also want to find out if the policy allows you to convert it to another type of coverage. Many term life insurance policies make it possible for you to convert to hole or universal life insurance policies.
If you are in the market for level term life insurance, don’t hesitate to fill in the form on this page. You can get a quote for a policy to fit your needs.
Mozdex Insurance Advisors have helped thousands of families secure their futures with proper insurance planning since 1997.