Level term life insurance

No, with level term life insurance, your premiums and payout amount remain fixed for the whole term of the policy.

This means your price won’t rise, but the payout won’t increase with inflation either — its value may reduce over time.

If you outlive the term of your level term life insurance, the policy ends and no payout or refund of premiums is made.

If you still want cover, you’ll usually need to take out a new policy. This can cost more because you’ll be older and may need to go through medical checks again.

Some insurers may allow you to extend your policy or convert it to a whole of life policy, but this depends on the insurer and the terms of your original policy.

If you miss a payment, your life insurance policy may lapse, meaning you lose your cover and would not receive a payout if you died.

Most insurers offer a short grace period during which you can make up a missed payment without losing cover. Some policies offer a waiver of premium option, which keeps your cover active if you cannot work due to illness or injury.

Yes, you can cancel your level term life insurance at any time. However, you normally won’t get back the premiums you’ve already paid.

Yes, most people with pre-existing medical conditions can still get level term life insurance, although it depends on the condition and its severity.

You may be asked for extra medical information or test results to help insurers assess your risk. Premiums may also be higher, although it can be more affordable than people think. For example, a 30 year old non-smoker taking out a £200,000 30-year life insurance policy will on average pay just £3^{^} more a month if they also have well-controlled diabetes.

If you have a serious condition such as cancer, you may need to use a specialist insurer. These policies are often more expensive. There are also guaranteed acceptance life insurance policies that don’t require medical checks, but these usually offer lower payouts and higher premiums.

It’s important to answer all medical questions honestly, as incorrect information could invalidate your policy.

Insurers usually ask for basic medical information to assess your risk and calculate your premiums. This may include details of any pre-existing conditions and relevant family medical history. In some cases, they may ask you to take a medical exam or supply a report from your GP.

Insurers cannot access your medical records without your consent. However, it’s essential to answer all questions honestly. If you don’t disclose important information, your policy could become invalid and may not pay out when you need it.

Yes, terminal illness cover is often included as standard with level term life insurance, but this depends on the insurer and policy.

Terminal illness cover allows you to claim early if you’re diagnosed with a terminal illness, usually defined as having a life expectancy of less than 12 months. The payout is the same lump sum your policy would have paid if you had died during the term.

This is different from critical illness cover, which is optional and pays out if you’re diagnosed with one of the specific conditions listed in your policy.

Yes, you can take critical illness cover out in addition to your life insurance or buy a combined policy.

• Additional cover pays out twice, once if you become critically ill, and again if you die during the term.

• Combined cover only pays out once, either for a critical illness or for death.

Critical illness cover pays out a lump sum if you’re diagnosed with a serious condition, such as a heart attack, stroke or certain cancers. Adding it to your level term policy gives you more protection, but it will increase your monthly premiums.

Some level term life insurance policies have a waiting period at the start, during which certain claims won’t be paid. In particular, it is common for level term insurance policies to have a 12-24 waiting period before a death by suicide would be eligible for a claim.

Any waiting period and the situations it applies to will be clearly set out in your policy documents, so it’s important to check these before you buy.

Level term life insurance covers you if you die during the policy term. If that happens, it pays a lump sum to your beneficiaries or into a trust.

Many level term policies also include terminal illness cover. This usually means you can claim early if you’re diagnosed with a terminal illness and have a life expectancy of less than 12 months.

You can often add critical illness cover for an extra cost. This pays out if you’re diagnosed with a serious condition listed in your policy, such as certain cancers, a stroke or a heart attack.

Level term life insurance does not pay out if you die after the policy term ends. It also won’t pay out if exclusions apply, for example if important medical information wasn’t disclosed when you applied. Always check your policy wording so you know exactly what is and isn’t covered.

Life insurance payouts are not subject to income tax or capital gains tax. However, if the payout forms part of your estate and your estate exceeds £325,000, it may be subject to inheritance tax at 40%.

You can avoid this by writing your policy in trust, which keeps the payout outside your estate and ensures your beneficiaries receive the full amount.

Yes, most level term life insurance policies can be written in trust.

It's often recommended to put your life insurance policy in trust because it means the payout won’t form part of your estate. This can help your beneficiaries receive the money more quickly and may reduce or avoid inheritance tax.

You can usually choose who the payout goes to when setting up the trust. Trusts are typically free to arrange and can be set up when you buy your policy or later on.

Whether you choose single or joint life insurance depends on your situation. If you’re part of a couple and have dependants, joint life insurance can be a slightly cheaper way to provide financial protection for your family if something happens to one or both of you.

However, most joint policies only pay out once, when the first person dies. You may also need to alter your life insurance policy if you and your partner get divorced.

Yes, you can hold multiple life insurance policies in the UK. However, it’s often simpler and more cost-effective to adjust a single policy rather than manage several.

It is reasonably common for people to hold multiple protection insurance policies simultaneously, because these often cover different things. For example, alongside your life insurance policy you could have critical illness cover in case you are diagnosed with a serious illness or income protection insurance if you're too ill to work.