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Why should I get Level Term Life Insurance?

Most people who buy life insurance opt for term insurance. It is the most popular kind of life insurance and there are three main types:

  • Level-term life insurance (family protection)
  • Decreasing-term life insurance (mortgage protection)
  • Increasing-term life insurance (index-linked)

In this article, we will look at level-term life insurance.

We will look at:

  • What is level term life insurance?
  • Why should you get level term life insurance?
  • FAQs

Term insurance is life insurance that will give you cover for a specific amount of time, for example; twenty years. It will cover you for the agreed period only. After the term ends, the cover will also end. Term insurance is designed to protect your family from the financial stress that can come from sudden or unexpected deaths.

Level term life insurance is a type of term insurance where the premiums and the pay-out or “sum-assured” are fixed for the entire term. This means neither the premiums nor the pay-out will increase with inflation.

You buy level-term life insurance for a certain period of time, as with all term insurance. You then pay regular sums of money or “premiums” into this policy throughout the term; every month or every year. If you die within this term, then your loved ones will receive the pay-out, a tax-free lump sum.

The premiums you pay in will not change throughout the term. This means you can be certain when you start the cover, exactly what you will be paying and exactly the amount of money your beneficiaries will receive.

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There is no average cost for life cover and this is also the case for level-term life insurance. The ideal pay-out for you and how much money your family needs to fund their lifestyle, will not be the case for someone else and their family.

The cost will also be affected by a number of main factors, such as; your age, your lifestyle, your medical history and what you do for a living.

One of the main reasons people opt for term life insurance is to cover a mortgage or debt. This is so if you die unexpectedly, your family will still be able to pay off the debt, especially if you are the main breadwinner.

This is why many mortgage lenders will recommend you have a life insurance policy before you take out a mortgage.

If your only concern is this repayment then decreasing-term insurance might be the best option for you. However, if you want your family to have some money left over for daily living, funeral expenses and emergencies then level-term insurance would be a better fit.

You and your family will have the security of knowing exactly the amount of money that will be paid out.

Another significant reason for taking out level-term life insurance is to cover your children financially until they are old enough to take care of themselves.

If, for example, there are twenty years until your child will be old enough to be financially independent, you might want to take insurance for twenty years so if you pass away, the mortgage will be covered in their home and there will be money left over to pay for their living expenses.

Level-term life insurance and decreasing-term life insurance are the two most popular types of life insurance. And then there is the third type of term life insurance; increasing-term life insurance, which is more expensive, but a policy many people find is best for them.

To help you decide which policy is best for you, we’ll look at the differences between the three.

All three types of term insurance only cover a specific period of time. If you die after this period, your family will not receive anything. The premiums and pay-out is where they are different.

Decreasing-term life insurance is the most affordable of the three. This is due to the pay-out gradually decreasing throughout the term. As the pay-out decreases over time, so do the premiums. Many people choose this insurance to sync in with their mortgage and loans.

Increasing-term life insurance is the most expensive of the term insurances. The pay-out increases as the term progresses and so do the premiums. This is to keep up with the rising cost of living and inflation. Many people also choose this to keep up with how their lifestyle changes over the years.

Level-term life insurance falls in between these two. The policy has the exact same premiums and pay-out at the beginning and the end of the term. This is so your family will know exactly what to expect financially if you pass away unexpectedly at any point in the term.

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Here are some of the answers to the most common questions that people ask us when we’re talking about life cover.

What happens if I become ill?

Life insurance only pays out when you die but there is an extra you can add to your policy called critical illness cover. This will pay out a tax-free cash sum to you personally if you are diagnosed with a serious medical condition or disability.

Your premiums will be more expensive if you add this cover but you may decide this safety net is worth it. Critical illness cover can be invaluable if you depend on your income from work to fund your lifestyle and home.

How do I lower the cost of my premiums?

The sooner you take out life cover, the cheaper your premiums will be. This is because life insurance gets more expensive the older you get.

Even if you don’t think you need to worry about your death for a while yet, it’s still worth taking a look so you can save yourself money in the long run.

Another way to lower the cost is to make healthier lifestyle choices at least a year before you buy. Not only will this be beneficial to your health, it will also make you less of a risk in terms of life insurance.

So, for example, if you quit smoking 12 months before you buy, you will probably not have to pay as much as a smoker.

Can I change my policy later on?

Your life is bound to change over the years. You may have children or grandchildren, move into a bigger house or change careers. If this happens, your current life insurance may not still be suitable for your lifestyle.

When you first buy term insurance, you will be able to choose between three types of plan:

  • Renewable: You can renew this term insurance policy when it expires, which means you won’t need to go through a health check again. However, this means the premiums can change too.
  • Reviewable: This plan will be fixed for a set period but after this period ends you and your insurer can review it and your changed circumstances.
  • Convertible: This plan is where you start out on term insurance but you have the option of switching to whole-of-life insurance later on down the line.

Can I take joint insurance with my partner?

Yes, some couples decide to opt for joint life insurance as a more affordable way to cover two lives.

Be aware that although it may seem cheaper at first, joint life insurance pays out only once. This means when one half of the partnership dies, the other person will get a lump-sum and then will not be covered themselves.

Also, as they will now be older, it will be more difficult to get life cover again. This is why joint life insurance is only a seemingly more affordable option for couples.

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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Our Mission: To provide easy access to fair pricing, affordable protection and the very best financial security to families and individuals. We are dedicated to offering comprehensive insurance solutions that safeguard the well-being of our policyholders. Guided by integrity, transparency, and a commitment to excellence, we strive to empower consumers and families to face the future with confidence. Our mission is not just about policies; it's about protecting dreams, ensuring legacies, and being a trusted partner on life's journey.

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