Level Term Life Insurance

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A level term life insurance policy will pay out the same amount of money for a claim, whether the claim is made towards the beginning or end of the policy. Your monthly life insurance payments stay the same, and there will only be one payout.

What is level term life insurance?

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’.

Level term life insurance covers you for a set sum that remains the same during the term. Both the sum insured and the premiums are always fixed with a standard level term life policy. The price you pay won’t increase with inflation, but then neither will the sum insured - 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 then use to cover any financial commitments you have if you pass away during the policy term.

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

How much does level term life insurance cost?

The younger you buy level term life insurance, the cheaper your premiums will be.

According to MoneySuperMarket data, those in the 31 to 39 age group will pay an average of £9.64 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 £18.84 per month. Our data found that the monthly cost of life insurance continues to rise when you look to take out life insurance later on. 

Age group

Monthly cost of level term life insurance for a single policy

18-29

£6.15

30-39

£9.64

40-49

£18.84

50-59

£37.98

60+

£138.25

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 between £150,000 and £200,000 for 10 – 20 years, from January to December 2018.

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.

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 as listed on your policy.

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 pay 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

£6.15

£13.74

30-39

£9.64

£24.64

40-49

£18.84

£51.60

50-59

£37.98

£101.81

60+

£138.25

£334.16

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 between £150,000 and £200,000 for 10 – 20 years, from January to December 2018.

Why consider level term life insurance?

If you have a mortgage, most mortgage lenders will insist you have a life insurance policy in case the worst should happen to you or your partner. Some homeowners consider level term life insurance because the lump sum can pay off your mortgage.

But what sets a level term life insurance apart from other types is that the payout will remain the same. This is regardless of whether you’ve made one mortgage repayment or you’ve only got one left.

If you were to pass away having paid off the majority of your mortgage, the remaining amount could be handed down to your dependants.

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

The average sum insured for life insurance policies

The average amount of cover consumers look to take out across all term lengths and both single and joint policies, according to MoneySuperMarket data from January – September 2018. This amount also includes critical illness cover where it has been added to a policy.

Should you choose single or joint life insurance?

If you’ve decided to opt for level term life insurance over decreasing life insurance, you’ll then need to decide whether you want to take out single life insurance or joint life insurance with your partner.

A single level term life insurance policy helps to cover the financial contributions you make in your partnership or family.

A joint life insurance policy can be taken out by you and a partner – who might be a spouse, family member or business partner – and the cover amount you take out would then be made up of both of your financial contributions. 

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

£6.15

£10.88

30-39

£9.64

£17.56

40-49

£18.84

£33.72

50-59

£37.98

£63.07

60+

£138.25

£215.13

The average costs above were based on MoneySuperMarket customers looking level term single and joint life insurance, for a cover amount between £150,000 and £200,000 for 10 – 20 years and for life insurance only (no critical illness cover), from January to December 2018.

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.

This means that 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, for example, the payout would be even lower because the size of your mortgage will have shrunk.

Family income benefit insurance is another alternative policy that pays out a monthly income from the point of claim to the end of the policy term. If, for example, you passed away in year 15 of a 20-year term, the insurer would pay an income to your family for the remaining five years of the term. Premiums for family income benefit insurance tend to be cheaper than level term life policies.

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 know that this will make your premiums much more expensive. So 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 £26.13 a month on average for level term life insurance without critical illness cover – compared to £13.98 for non-smokers – and  £49.01 a month for level term life insurance with additional critical illness cover – compared to £29.98 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 between £150,000 and £200,000 for 25 years, who said they had used nicotine in the past 12 months. Data from January to November 2018.

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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