What is Level Term Life Insurance?
Level term life insurance is a type of life insurance that lasts a predetermined number of years (the “term”) and is fairly straightforward. Under a level term life insurance policy, you pay premiums for coverage and the insurer provides a death benefit to your loved ones if you die during the term. Whether you pass away in the third year or 23rd year of your 30-year policy, your beneficiaries will get paid the same amount. If you live longer than the term, the policy expires, and you cease paying for it.
Level Term vs. Whole Life Insurance
Whole life insurance is the most common form of permanent life insurance. The primary differences between term and whole life policies include the following:
• As long as you pay your premiums, whole life policies never expire
• Whole life policies come with a cash value component that earns interest
• Term life insurance only covers you for a certain number of years, while whole life provides lifelong protection
• Whole life premiums can cost five to 15 times more than term life insurance policies with the same death benefit
Whole life insurance also offers a level premium and death benefit. If you accumulate enough cash value, you can often use it to purchase additional coverage. However, whole life is more costly than level term insurance, and many people might not need permanent coverage or extra features.
What is the Death Benefit?
The death benefit is the maximum amount that the insurance company will pay out when you die. The higher your age, and the greater the amount of coverage you have, the higher the death benefit will be. You can choose how much of your premium you want to allocate towards the death benefit.
What is the Premium for Level Term Life Insurance?
For most people, level term life insurance is one of the most cost-effective options. Your premiums are mainly determined by your age, health, medical history, and other factors, like your hobbies and driving record.
What Happens When a Level Term Life Insurance Policy Expires?
Your coverage will stop when the term of your insurance expires. You have a couple of options after that:
• Go without life insurance. This is only something you should do if you can self-insure and have no dependents or outstanding debts.
• Purchase a new level term policy. You’ll have to take the medical exam again, so while your premiums will be level, they may be more expensive than the premiums of the expired policy.
• Convert your term policy into a permanent policy. This is a common aspect of term policies. While a permanent policy will last your entire life, it’s typically more expensive than a term policy.
What to Expect When You Apply for Term Life Insurance
When you find a quote that you like and are ready to purchase a policy, you’ll start by filling out an application. Your life insurance agent will likely review your application answers and you may be asked to sign releases, such as one for your medical records.
Once the application is submitted to the insurance company, you may be asked to do a life insurance medical exam. The exam often includes height, weight, blood pressure, blood and urine samples, and questions about your health to verify that information on the application is correct.
Bottom Line
You don’t have to use an experienced level term life insurance agent, but using the best in the business will save you both time and money. If you have questions or want to talk about your life insurance needs, call or email me directly. My name is Ed Hinerman. Let’s talk.
