Term Life Insurance Articles
The Basics Of Level Term Life Insurance
2009-12-06
There are many different types of term life insurance available, and choosing the type that's right for your situation is an important part of selecting a policy. One of the newer types of policies is called level term life insurance. This sort of policy was introduced to combat one of the common criticisms of normal term life insurance plans - rate changes.
Under a normal term life insurance plan, rates can go up (or down, conceivably) during the course of a policy. The natural tendency is for a policyholder's overall health to go down as time goes by, so a normal plan is usually subject to gradually increasing in cost. Under a level term life insurance policy, however, rates are locked in. Consumers are guaranteed to pay the same premium at the beginning of a policy as they do at the end of the policy. Otherwise, it operates as a typical term life plan. If the policyholder dies during the set term (usually five, 10, 20 or 30 years), the beneficiaries named in the policy receive benefits equal to the value of the plan. The benefits do not change throughout the life of the policy.
There are drawbacks to a level policy, however. Because the same life insurance quote that you get at the beginning of the policy applies throughout the entire life of your policy, level term life insurance typically costs more from payment to payment than other types of term insurance. This can be a major drawback for some policyholders, as the elevated premiums can defeat the purpose of buying a term policy in the first place. Most lean towards term life insurance because it costs less than whole-life policies. Younger buyers, who might benefit the most from a term policy, often can't afford the higher rates of a level policy. Also, a level policy is still a term policy, meaning that if the policyholder doesn't die within the term, they don't get a return on the premiums that they'd paid in. Strictly speaking, other life insurance types, such as whole life insurance, are still a better overall investment if the policyholder lives to an old age.
For many buyers, though, the benefit of a regular premium at a steady rate greatly outweighs the cost of the increased fees of a regular term life policy. Level term life insurance effectively provides a safe form of investment, and allows for a hassle-free approach to life insurance that offers large benefits.
Level term life insurance is a great buy for some buyers, but get several quotes and read through prospective policies. Be sure that you understand how it works and all of its terms before making a purchase.
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There are many different types of term life insurance available, and choosing the type that's right for your situation is an important part of selecting a policy. One of the newer types of policies is called level term life insurance. This sort of policy was introduced to combat one of the common criticisms of normal term life insurance plans - rate changes.
Under a normal term life insurance plan, rates can go up (or down, conceivably) during the course of a policy. The natural tendency is for a policyholder's overall health to go down as time goes by, so a normal plan is usually subject to gradually increasing in cost. Under a level term life insurance policy, however, rates are locked in. Consumers are guaranteed to pay the same premium at the beginning of a policy as they do at the end of the policy. Otherwise, it operates as a typical term life plan. If the policyholder dies during the set term (usually five, 10, 20 or 30 years), the beneficiaries named in the policy receive benefits equal to the value of the plan. The benefits do not change throughout the life of the policy.
There are drawbacks to a level policy, however. Because the same life insurance quote that you get at the beginning of the policy applies throughout the entire life of your policy, level term life insurance typically costs more from payment to payment than other types of term insurance. This can be a major drawback for some policyholders, as the elevated premiums can defeat the purpose of buying a term policy in the first place. Most lean towards term life insurance because it costs less than whole-life policies. Younger buyers, who might benefit the most from a term policy, often can't afford the higher rates of a level policy. Also, a level policy is still a term policy, meaning that if the policyholder doesn't die within the term, they don't get a return on the premiums that they'd paid in. Strictly speaking, other life insurance types, such as whole life insurance, are still a better overall investment if the policyholder lives to an old age.
For many buyers, though, the benefit of a regular premium at a steady rate greatly outweighs the cost of the increased fees of a regular term life policy. Level term life insurance effectively provides a safe form of investment, and allows for a hassle-free approach to life insurance that offers large benefits.
Level term life insurance is a great buy for some buyers, but get several quotes and read through prospective policies. Be sure that you understand how it works and all of its terms before making a purchase.
