Level term life cover can be taken out to provide a lump sum to look after your family or pay off the mortgage.

What is Level Term Life Insurance?

Level term life insurance is a policy where the amount insured and the premiums stay the same throughout the entire term. Any beneficiaries will get the same insured amount whenever the policyholder dies within the term.

How does Level Term Life Insurance work?

Put in simple terms level term life insurance works by:

  1. A policy being set up on a life who usually becomes the policyholder

2. The amount insured remains the same ( level) throughout the entire term of the policy

3. The premium usually remains the same throughout the entire term of the policy

4. When the life assured dies, the insurer pays out the amount insured by the policy at the outset

What can level term life insurance cover?

Level term life insurance cover only pays out if the policyholder dies within the agreed term.

Critical illness cover can be added to level term life insurance cover. Which will pay out a tax-free sum if you become seriously unwell.

The payout can be used to leave an inheritance to loved ones. It can be used to pay the bills if they are dependent on your income. Or, it can be used to pay off an interest-only mortgage.

Is there anything that a level policy doesn’t cover?

A level policy does not automatically cover critical illness, should you become seriously unwell. Although, this can be added at an additional cost at outset. It does not cover you if you become too ill to work.

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Is a level term life insurance policy right for me?

To make sure that level term life insurance is right for you, it is best to speak with a qualified adviser. They will take into account your own specific circumstances, medical history and your budget.

What are the advantages of a level term policy?

With a level term policy, one of the advantages is that you always know exactly where you stand. 

  • The amount insured and the premium stay the same throughout the entire term of the policy, regardless of age or health.
  • If you have an interest only mortgage, as long as you have matched the mortgage amount, the policy can be used to pay off the outstanding balance.
  • The payout can be used to provide for your family. Protecting them from the financial impact resulting from your death.
  • You choose the length of term that fits your family’s life plans.

Are there any disadvantages to level term life insurance?

The disadvantages to level term life insurance are:

  • A level-term life insurance policy is usually medically underwritten. Meaning that if you suffer ill health or are older, this may be reflected in you paying higher premiums.   
  • Whilst your level term life insurance pays out a fixed cash sum payout, it’s worth bearing in mind that the amount won’t increase with inflation. ie the value of the payout won’t keep pace with rising living costs. This can be solved by arranging cover with an ‘index-linked option’. Allowing the policy benefit to increase on an annual basis. This helps to offset the effects of inflation.
  • If you have not written your life insurance policy in Trust, the payout could form part of your estate. So, could be subject to Inheritance Tax. At Future Proof, we help you to place your policy in Trust at no additional cost to avoid this.

Is level term cover worth it?

Level term cover is worth it if you need a policy that provides your loved ones with financial security for a fixed amount of time. This may be until your children are no longer dependent on your income until you retire, have paid off your mortgage or cleared any debts. 

The simplicity of this type of policy and its flexibility is what make it a good solid plan. 

  1. Premiums are fixed for the entire term of the policy.
  2. The death benefit is a guaranteed amount.
  3. If you place the policy in Trust the payout will be free of inheritance tax for your beneficiaries.
  4. Your Future Proof adviser will work with you and your budget to ensure that your monthly premiums are affordable.
  5. This type of policy is flexible. You get to choose the term and amount you need to insure that fits your situation.
  6. There are add-ons that can boost your policy – such as index linking, or waiver of premium.
  7. Insurers offer many additional benefits at no extra cost, such as Private GP services or mental health support. 

How long does a level term life insurance policy last?

A level term policy can run until your 90th birthday. It is important to choose a term that is long enough to cover your needs. As premiums rise the older you get, to apply for an extension when you are older after your policy term has finished would be costly.

However, a term can be chosen to:

  • Match the age when your dependents will no longer rely on your income. 
  • Match when you expect to pay off your mortgage. 
  • Match your retirement age.

I want to buy level term life insurance, how do I do it?

To buy level term life insurance and receive the peace of mind that you have the most suitable policy for your requirements. It is best to pick up the phone and speak with your qualified Future Proof adviser. Or request a call back at a time that suits you. Your adviser will search the market for you. You don’t pay them for their advice, Future Proof get paid by the insurer if you decide to take a policy with them.

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How much does level term life insurance cost?

The Future Proof online quote calculator will provide a basic cost of how much life insurance will cost. Premiums start from a minimum of £5 per month.

Your Future Proof adviser can provide exact quotes that fit within all budgets to make cover affordable.

We conduct pre-application research by contacting several insurers to determine the best outcome for our clients. This avoids any nasty shocks later on during the underwriting process.

This table illustrates premiums payable for level term insurance by age and sum insured

Age in years Sum assured in £sTerm in yearsPremium in £s
32£500k25£17.80
32£300k25£11.89
45£500k25£33.40
45£300k25£52.62

Please note that any premiums mentioned are indicative only and based on this specific case study/ example, which is shown for information purposes only. Your own circumstances will determine whether the amount payable is more or less than the figure quoted.

What is the difference between level term and decreasing life insurance?

The difference between level term and decreasing term policies are illustrated in the table below:

Level term Decreasing term
Sum insuredRemains the same throughout the termReduces over the term
PremiumRemains the same throughout the term Remains the same throughout the term
Suitable for an interest only mortgageYes No

What factors affect the cost of level cover?

Your own circumstances will determine whether the amount payable is more or less than the initial figure quoted. 

Factors such as:

  • Age – the younger you are the lower the premiums will be.
  • Health & lifestyle – how many units do you drink per week? Do you partake in any dangerous sports?
  • Medical history – any pre-existing medical conditions? 
  • Smoking status –  being a smoker means you will pay higher premiums.
  • Type of cover required – would you like to include indexation benefit that protects against inflation?
  • Amount of insurance needed – is it a large sum insured? 
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Which provider offers the best level term life cover?

There is no one provider that offers the best level term life cover. Everyone’s circumstances are different and all insurers have their own ways of calculating their premiums. The best way of finding the best provider for you is by speaking to your Future Proof Adviser. They can search the market on your behalf to find you the most competitive premium. They can also factor in your circumstances to find the provider with the most beneficial additional benefits.

How do I get a quote for Level Term insurance?

Look at our simple four-step premium calculator by clicking on get a quote. It will give you a ballpark figure of monthly premiums. Your expert Future proof adviser will be able to provide you with a more exact quote based on your full circumstances.

Here are some questions that we are asked frequently by our new clients

  • It is a good idea to get critical illness cover with level term cover. Critical illness cover could be used: 

    • to repay the mortgage
    • to settle debts and bills
    • to pay for a family holiday
    • to pay for home conversions
    • To pay for care or hospital treatment

     Many people don’t think that they will suffer from a critical illness. However, accidents do happen and 1 in 2 of us will get cancer at some stage in our lives*. Cancer Research UK 2015.

    It’s even more worrying if you have a serious illness from which you may never recover. Whilst you are also worried about paying bills to keep your family protected. 

  • If you are over 50 you can take out level term cover. The oldest you can be to take out a level term policy is age 86 years.

  • It is possible for your partner and you to have a joint level term insurance policy. However, there will only be a single pay out for a joint life policy, paid out on the first death.

  • If you have an interest only mortgage a level term life insurance policy can cover it if you match the balance to the sum insured. However, if you have a capital repayment mortgage it may be more cost efficient to apply for a decreasing term policy.

How long does a life insurance policy last?

How long a life insurance policy should last depends on what the policy is for:

  • For a mortgage, the policy should last until you have paid the mortgage off in full
  • For family cover the policy should last until your dependents are no longer dependent on you
  • For family income benefit, the policy should last until your children are grown up and out of private education or university.
  • For funeral cover, the policy if it is a whole of life one will last until you die.

What is a life insurance beneficiary?

A life insurance beneficiary is a person who will receive the insurance payout.

Frequently asked questions about level-term medicals and pre-existing conditions

  • You will not be automatically guaranteed to be accepted for level cover. An application has to be submitted and medically underwritten. Based on your medical answers to the questions the underwriters have to make a decision on whether to accept you. They may request a report from your GP to look into your medical conditions more closely or request a private medical at your home. Which they will pay for. 

    They could add a ‘loading’ to the premium (this is an additional amount on top of the standard monthly premium to reflect their additional risk). They could exclude certain conditions if they might relate to our death. Worse case they could decline an application.  We want to avoid wasting time by making applications that might be declined. We speak to many of the UK’s leading insurer’s underwriters and give them an anonymous breakdown of the client’s situation. The purpose of this is to establish how they might view a client’s application. We only apply to the most sympathetic of insurers.

  • It is possible to get level term life cover without a medical exam. However, you must not have suffered any pre-existing medical conditions. There are also limits to the amount of cover you can obtain before any insurer might request a medical exam.

  • It is possible to have a pre-existing condition and still get level term life insurance. It all depends on what the condition is and its severity. Your Future Proof adviser will find the most sympathetic insurer for your condition. 

Level term and claims or the end of a policy term

Can I cash in my level term policy early?

You can not cash in your level term policy. If you cancel or stop paying your premiums, you won’t get any money back. There is no investment value in the Level Life Insurance policies which we arrange.

 

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Level term cover pays out however much you insure. If you have put your policy in Trust the pay out will be tax free. This is an additional service that Future Proof offer at no extra cost.

If you outlive your level term life insurance policy, your policy will end. It is important, therefore, to make sure that you choose a long enough term for your requirements at outset. As applying for a new level term policy at an older age will cost more in monthly premiums. 

If there is no reason for you to have a level term policy and you no longer need it. It is possible to cancel it, just inform Future Proof or your insurer directly.