Level Term Life Insurance

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Life insurance can help provide financial security for your loved ones when you die, but unlike some policies, level term life insurance will pay out the same amount whenever the claim is made. Our guide explains more.

What is level term life insurance?

Life insurance is cover you take out to help your loved ones cope financially when you die.

Level term life insurance means you pick the size of the payout, known as the ‘sum insured’ and an amount of time you’re covered, called the ‘term’.

Both the sum insured and the premiums are fixed throughout the term, so the price you pay won’t increase with inflation, but neither will your payout.

If you don’t pass away during the term, your level term life insurance simply lapses and you’ll need to take out a new policy if you want further life insurance.

What does level term life insurance cover?

Level term life insurance pays out a set amount of money that your dependants can use to cover any financial commitments.

A level term life insurance payout could help to cover:

  • Your mortgage repayments*
  • Any household bills and day-to-day expenses
  • Any current or future school fees
  • Any money you have borrowed that you still need to pay back
  • Any extra money that would help your loved ones if you were no longer around

*Some lenders make it a condition of the mortgage that you must take out life insurance.

How much does level term life insurance cost?

The younger you buy level term life insurance, the cheaper your premiums are likely to be. Because your premiums are fixed throughout the term of the policy, it’s an incentive to look for cover sooner rather than later.

According to MoneySuperMarket data, those in the 31 to 39 age group will pay an average of £7.93 per month for level term life insurance only (without critical illness cover) for a single policy, while those in the 40 to 49 bracket will pay around £13.12 per month. Our data found that the fixed monthly cost of taking out life insurance continues to rise as you age.

 

Age group

Monthly cost of level term life insurance for a single policy

18-29

£5.80

30-39

£7.93

40-49

£13.12

50-59

£24.56

60+

£44.90

 

The average costs above were based on MoneySuperMarket customers looking for level term single life insurance only (without critical illness cover), with a total cover amount of £100,000, from October 2019 to September 2020.

If you’re aged 50 – 80 years-old, a specialist over 50s life insurance provider can offer a more affordable life insurance option than a standard life insurance policy.

However your life insurance premiums can be affected by your lifestyle – for example, if you smoke or vape.

How much level term life insurance do I need?

This is very much a personal choice depending on your individual circumstances and dependents.

Things to consider include how much you owe. For example, if you have a mortgage, this is likely to be your largest outstanding debt, but there may be others.

And it’s not just about leaving loved ones or dependents debt-free when you die. You should also consider how they will manage from day-to-day with their finances and the lifestyle you’d like to provide for them.

For example, if you have a partner and children, your passing away my affect your spouse’s ability to earn a living because they will need to spend more time taking care of the kids. Read more with our guide to How much life insurance do I need?

How much life insurance do people usually take out?

The most popular amount of cover to take out for life insurance policies is £100,000 - £200,000, according to MoneySuperMarket data. 

 

The most popular amount of cover to take out is £100-£200k for all term lengths

According to MoneySuperMarket data from October 2019 to September 2020

 

Can you add critical illness cover to your level term life insurance?

Critical illness cover can help to pay for your mortgage and other outgoings if you’re diagnosed with a serious medical condition – for example, a heart condition or certain types of cancer.

Adding critical illness protection to your life insurance policy means you’ll have more cover – so your monthly life insurance payments will be more expensive.

You can generally take out critical illness cover either in addition to or combined with your life insurance policy:

Additional cover: Life insurance with an additional critical illness policy pays out a) if you get a critical illness and b) if you pass away (both during the term of your policy)

Combined cover: Combined life and critical illness cover only pays out once, either if you become critically ill or if you pass away (both during the term of your policy)

MoneySuperMarket offers the option of adding additional critical illness cover when you’ve completed a life insurance quote, with your premium calculated using the details you gave when applying for life cover. We believe this provides a more flexible and comprehensive solution than a combined policy.

The table below shows the average monthly costs of level term life insurance with additional critical illness cover for a single term policy by age group.

 

Age group

Monthly cost of level term life insurance for a single policy

Monthly cost of level term life insurance plus critical illness cover

18-29

£5.80

£10.13

30-39

£7.93

£14.97

40-49

£13.12

£26.23

50-59

£24.56

£47.22

60+

£44.80

£103.20

The average costs above were based on MoneySuperMarket customers looking for level term single life insurance only (without critical illness cover) and with critical illness cover included as an additional or a combined policy, with a total cover amount of £100,000, from October 2019 to September 2020.

Why consider level term life insurance?

Advantages of level term life insurance:

  • Your premiums are fixed, so taking out a level term life insurance policy early enough in life allows you to lock in low monthly payments that probably won’t be available if your try to take out cover later on

  • The payout will remain the same throughout the length of the term, so your dependents will know how much they are getting

  • It not only provides financial support if you die, but peace of mind that your loved ones will be supported if you’re gone

Disadvantages of level term life insurance:

  • Because you have a fixed sum insured the premiums tend to be more expensive than those for decreasing term life insurance
  • Your fixed payout takes no account of inflation, so cover of £100,000, for example, will not hold the same real value in 20 years. If this is a concern you should look for increasing term or index-linked term life insurance. These policies pay out a sum that rises either by a fixed amount each year, or in line with the retail price index
  • If you don’t die within the term, then unlike whole-of-life cover, your family won’t receive a payout

Should you choose single or joint life insurance?

Once  you’ve decided on the type of  life insurance you want, you’ll then need to decide whether you want to take out single life insurance or joint life insurance with your partner.

A joint life insurance policy can be taken out by you and a partner – who might be a spouse, family member or business partner.

If you choose a joint level term life insurance policy then the policy will pay out the same amount if one of you passes away during the policy term, but the policy provider will only pay out once.

This means that the surviving partner won’t then have any life insurance cover and they’ll need to think about taking out their own life insurance policy.

Taking out a joint life insurance policy can be cheaper than taking out two single life insurance policies if you’re in a couple or partnership.

 

Age group

Monthly cost of level term life insurance for a single policy

Monthly cost of level term life insurance for a joint policy

18-29

£5.80

£8.62

30-39

£7.93

£12.48

40-49

£13.12

£21.91

50-59

£24.56

£40.20

60+

£44.80

£72.87

 

The average costs above were based on MoneySuperMarket customers looking level term single and joint life insurance, for a cover amount of £100,000 and for life insurance only (no critical illness cover), from October 2019 to September 2020.

Are there alternatives to level term life insurance?

Level term life insurance is the ideal option if you are looking for a set amount of cover for a certain period. You set the payout – the sum insured – and the length of time you are covered – the term.

However, if you are thinking of buying a policy specifically to cover a debt that will shrink over time, such as a repayment mortgage, you might be better off opting for ‘decreasing’ rather than level cover. Decreasing life insurance policies pay out an amount which reduces over time, and means your premiums will be cheaper than with a level term life insurance policy.

For example, as you start to repay your mortgage, the amount of cover goes down. If you were to pass away 10 years into your mortgage, your repayment would cover the outstanding debt, but if you’d made 19 years of repayments the payout would be even lower because the size of your mortgage will have shrunk.

You might also consider an income protection policy – this can help you meet your financial commitments such as bills and mortgage payments if you’re forced to take a long break from work. For example, if you become ill or injured, or you lose your job through no fault of your own, an income protection policy can pay out a portion of your salary each month.

Review your level term life insurance cover

You should regularly review your life insurance to make sure it still meets your needs, especially if your circumstances change. For example, if you buy a bigger property and extend your mortgage, you’re likely to need additional cover, perhaps for a longer term. You might also want greater protection in place if your family expands.

Remember, however, never to cancel an existing policy until you have a new one in place, as this will leave your loved ones without any protection.

Save on level term life insurance

There are ways to save money on your level term life insurance:

  • Don’t over-insure yourself. It may be tempting to take out cover for hundreds of thousands of pounds, but  this will make your premiums much more expensive. While you may be helping your family in the long run, it might be hard to keep up the payments.
  • Check if you’re already covered by your employer. Many firms provide life insurance with a sum insured of, say, four times the individual’s salary as part of their employee benefits – especially if you have a particularly dangerous or risky job.
  • Stop smoking. Smokers pay £17.77 a month on average for level term life insurance without critical illness cover – compared to £8.88 for non-smokers – and £22.18 a month for level term life insurance with additional critical illness cover – compared to £14.47 for non-smokers.*
  • Take out a policy sooner rather than later. You’ll pay more for level term insurance if you’re over 45. Standard life insurance policies for the over 50s can be more expensive, with more restrictions.
  • Shop around. Whether you’re already insured, or if you’re looking to take out your first policy, it’s important to shop around to make sure you find the right cover for you, at a price you can afford.

* The average costs above were based on MoneySuperMarket customers looking for level term life insurance cover for a single policy without additional critical illness cover and with additional critical illness cover, with a total cover amount of £100,000, who said they had used nicotine in the past 12 months. Data from October 2019 to September 2020.

Compare level term life insurance quotes

Comparing life insurance quotes can help you find the right policy for you and your beneficiaries. You can use MoneySuperMarket’s life insurance comparison tool to compare level term life insurance quotes.

Answer a few questions about you, your health and lifestyle and the amount of cover you need. You’ll need to make sure your responses are accurate and honest to make sure your dependants would receive a payout if you passed away.

You’ll also be able to add a second applicant to your policy if you want to take out joint life insurance, and you can then choose whether you want to take out level term or decreasing term life insurance.

You’ll then be able to add more detail about your health and lifestyle, which means you can compare personalised life insurance quotes by price per month and features.

Some prices will be guaranteed and fully underwritten which means you can buy immediately. With some you’ll need to confirm certain details with the insurer.

You can change the cover amount and cover length to update your quote results and see how this affects the monthly price you pay. You can also change the results view from level cover term to decreasing to see how this changes the policy.

If you want to add critical illness cover to see how this affects the cost of life insurance then you can do this by selecting ‘Add critical illness cover’.

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