Life insurance may benefit many. However, the journey to purchasing a policy can be challenging; complex and specific terminology often leads to indecision and the fear of purchasing the wrong cover. Fortunately, L&G aims to demystify the process by defining a level term policy, explaining its unique benefits, and showing how it compares to other forms of protection.
What is level term life insurance?
The defining quality of level term life insurance is that, unless any changes are made, the amount you pay and your cover remain the same throughout the entire length of the policy.
The financial sum a policyholder’s loved ones could be entitled to would remain the same from the first day the policy starts to the day before the policy ends, which is why the life insurance is given the term ‘level’. L&G’s Life Insurance is an example of a level term policy.
Is a level term policy the right choice for me?
There are a variety of needs and circumstances that suit a level term policy. If you know your loved ones may find it difficult to pay their ongoing living costs in your absence, life insurance can provide invaluable peace of mind.
In the tragic event of passing away during the length of your policy, level term life insurance could be a financial lifeline for your family.
A mortgage is a potential, common debt dependents can be left with; however, educational costs, everyday bills and children’s activities are all examples of what a life insurance payout could also cover. A policy could help your family stay in their home along with maintaining their lifestyle.
What are the drawbacks of a level term policy?
Whilst your loved ones will receive a fixed cash sum upon payout, this amount will not rise with inflation; therefore, it will not stay in line with rising living costs. Equally, if your policy is a part of your estate, it could be subject to inheritance tax.
Requirements of a life insurance policy
Although a life insurance policy can be tailored to fit individual circumstances, there are some standard requirements and features of an L&G policy:
- The minimum age for taking out life insurance is 18 with 77 (67 for critical illness cover) being the maximum and the term must end by the policy holder’s 90th birthday (or 75th for critical illness cover).
- The minimum policy term is 1 year for life insurance and 2 years for critical illness cover and the maximum is 50 years for both.
- A policy requires monthly payments and 80% of applications are offered on standard terms.
Alternatives to a level term policy
In terms of other options, if you are looking to cover an outstanding repayment mortgage, consider a decreasing life insurance policy. Holders of this protection pay a standard amount; however, their potential payout decreases approximately in line with their repayment mortgage. This policy could be a safety net for ensuring your loved ones are able to stay in their home, avoiding further hardship at an already difficult time.
Level term compared to decreasing life insurance
When choosing between policy types, your decision depends on your financial and family’s priorities.
A level term policy is ideal for helping your family cover ongoing living costs, household bills, education fees or a mortgage as it maintains the same potential payout throughout the term.
On the other hand, a decreasing policy is designed specifically to protect a repayment mortgage in the event of an untimely death. Cover decreases roughly in line with repayments and could prevent your loved ones from losing their family home.
Should I purchase level term life insurance?
Needs can greatly vary from household to household. The key priority is protecting your loved ones’ financial future. As options for cover begin at only £5 a month, depending on individual circumstances, L&G’s life insurance caters to a range of budgets.
To find out more about level term life insurance and other protection policies that may be suitable for you, please visit L&G’s website.
