We'll need some information about you and your family's health and medical history, including any pre-existing medical conditions
Level term life insurance is a type of cover you take out to help your loved ones cope financially when you pass away. You'll be able to choose the size of the pay out, known as the 'sum insured' and the amount of time you're covered, called the 'term.'
Both the sum insured and your premiums are fixed throughout the term, so the price you pay won't increase with inflation - but neither will your pay out. If you don't pass away during the term of your policy, your level term life insurance will lapse - and you'll need to take out a new policy if you want life insurance going forward.
Level term and decreasing term life insurance will pay out if you die during a fixed period of time, known as a 'term.' However, the pay out for each works slightly differently:
With decreasing term life insurance, the size of your pay out reduces over time. Often, decreasing term life insurance is bought to cover debt repayments, like your mortgage - as your mortgage repayments decrease, so does your pay out.
With level term life insurance, your pay out amount will remain the same during the term of your policy, so you'll know exactly how much money your dependents will receive. For this reason, level term life insurance is usually more expensive than decreasing term.
It's important to bear in mind that your decreasing term life insurance might not cover any outstanding mortgage payments, or other debt you owe. Your personal, financial circumstances should be the deciding factor in choosing which type of life insurance is right for you.
You'll have fixed premiums, so taking out your policy earlier in life allows you to lock in low monthly payments that probably won't be available if you take out cover later on
Your pay out will remain the same throughout the length of the term, so your dependents will know how much they'll receive
A level term life insurance pay out can offer financial support to your loved ones when you die, as a source of income or to cover things like loan repayments
Because you'll have a fixed sum insured, the premiums tend to be more expensive than those for decreasing term life insurance
Your fixed pay out won't take into account inflation, so if you have cover of £100,000, this won't hold the same real value in 20 years time
If you don't pass away within the term of your policy, unlike whole-of-life cover, your family won't receive a pay out
Level term life insurance policies pays out your sum insured the people who depend on you financially, if you pass away during the term of your policy. They’ll usually pay out if you pass away because of:
An unexpected illness - such as a heart attack, stroke, or cancer
They may also pay out if you get a terminal illness, but this isn't always the case.
Life insurance policies don't usually pay out if you pass away as a result of::
Drug or alcohol abuse
A health issue you hadn't disclosed to your provider
How much level term life insurance you need will depend on a few factors. You should consider how much your dependents rely on your income, any repayments you have left to make on your mortgage or other loans, and how much you can afford to pay for your premiums each month.
To make sure your pay out is financially protected, you can choose to put your life insurance policy in trust. This can help avoid the value of a pay out becoming liable to inheritance tax and prevent it from falling within your estate. When this happens, it becomes part of a process called 'probate' which is the distribution of your estate after your death.
Our life insurance calculator can help you work out how much cover you need.
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Level term life insurance can give your loved ones financial protection when you've passed away, so they have less to worry about. Just make sure you're not left unprotected - if you don't pass away during the term of your policy, your policy will lapse and you'll need to take out a new policy if you want life insurance going forward."
- Neal Cross, Senior commercial manager for life insurance
We'll need some information about you and your family's health and medical history, including any pre-existing medical conditions
You'll need to give us a few details about your lifestyle, such as whether you smoke and your drinking habits
The younger you are when you take out your policy, the cheaper it’s likely to be. The type of work you do can also affect the price
If you're looking to take out a joint policy, you'll need to have information to hand about your partner's health, lifestyle and work
We run our life insurance service with our partner, LifeSearch. If you'd like some guidance about what kind of cover you need, you can talk to them free of charge
Give them a call on 0800 197 3178.
Their opening hours are:
Monday to Friday 8am to 8pm
Saturday 9am to 2pm
Sunday 10am to 3:30pm
The younger you are when you buy 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 our data, those in the 30-39 age group will pay an average of £10.611 a month for level term life insurance only (without critical illness cover) for a single policy, while those aged 50 to 59 will pay around £27.581 per month.
If you're over 50 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.
1 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 July 2020 to January 2021.
Monthly cost for a single policy
While it can be tempting to buy a large amount of cover, this will make your premiums higher
Quitting smoking can improve your health, and it could also mean you're able to get cheaper life insurance
If you take out your policy at a younger age, your premiums are likely to be cheaper
It's always good to compare your options, to make sure you find the right cover at the right price
With level term life insurance, you’ll decide on your policy’s ‘term’, and the value of the pay out your dependents will receive. The word ‘term’ in this scenario refers to the time you’re covered for and how long you’ll be paying your premiums.
If you don’t pass away during the term of your level term life insurance, your life insurance will lapse and you’ll need to take out a new policy if you want to continue with your cover. With this in mind, it’s important that you know when your level term life insurance policy is due to end.
If you outlive the term of your policy, your dependents won’t receive a pay out when you die. Some insurers may offer to extend your policy’s term, but it’s likely to come with a higher premium.
Before you renew your cover, it’s a good idea to weigh up whether you still need your life insurance. It’s likely that your financial circumstances will have changed during the term of your policy, like your mortgage being paid off.
If you still need your cover, you may be able to reduce the pay out amount and in turn reduce the cost of your premium.
Critical illness cover can help to pay for your mortgage and other outgoings if you’re diagnosed with a serious medical condition, like a heart condition or certain types of cancer.
Adding critical illness cover to your level term 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 gives you the option to add additional critical illness cover when you’ve got your life insurance quote, with your premium calculated using the details you gave when applying for life cover. We believe this offers a more flexible and comprehensive solution than a combined policy.
Whether you should take out single or joint level term life insurance is up to you. If you have dependents, it’s a good idea to take out life insurance to protect them financially if the worst happens. If you’re a couple, especially if you have children, life insurance can help protect your family.
If you and your partner each take out your own policies, your dependents will potentially receive two pay outs – one for each of you if you were to both pass away within the term of your policies. Whereas a joint policy would only pay out once, depending on the policy you choose.
A ‘first death’ joint life insurance policy will pay out on the death of one of the policyholders within the stated term, meaning the other policy holder will no longer have life insurance. ‘Second death’ joint life insurance only pays out once both policyholders have passed away.
Insurers will want to assess your level of risk when you get your life insurance and will use this to calculate your premiums. This may include any pre-existing medical conditions you live with, and your family’s medical history.
It’s important that you answer any questions honestly when you get your life insurance quote, so you know your cover is valid and you aren’t left uninsured when you need it most.
If you miss your life insurance payment or stop paying, you policy may lapse and you’ll no longer be covered or receive any return from your previous payments.
If you miss a payment, your insurer may offer you a ‘grace period’ of time to pay the missed premium before your policy lapses. It’s important to check with your life insurance provider the specifics of your policy, so you aren’t caught out unexpectedly and left uninsured.
If you’re not able to work because of an illness or injury, which means you can’t afford your monthly life insurance payments, a waiver of premium could mean you’ll still be covered during this time.
This waiver will need to be added to your policy as an additional level of cover and it will need to be taken out from the start of your life insurance policy.
With level term life insurance, both your sum insured and your premiums are fixed throughout your policy’s term. This means the price you pay won’t increase with inflation, but neither will your pay out.
If you’ve taken out level term life insurance for financial support for your loved ones as a lump sum when you die, there’s usually no income or capital gains tax to pay on the proceeds of your policy. But if the total value of your estate is more than £325,000, inheritance tax (IHT) will be deducted from your insurance pay out at a rate of 40%. You can avoid paying inheritance tax by writing your policy ‘in trust.’ For more information on life insurance and tax deductions, click here.
You can choose to cancel your level term life insurance policy at any time, but most policies won’t give your money back if you cancel before the end of the term.
If you live with a pre-existing medical condition, you should still be able to get level term life insurance. If you have a more complex condition and you’re struggling to get a price online, a broker or adviser like our partner LifeSearch can help you find the right provider for your needs.
You may need to share additional medical information (like copies of tests) with the provider, to help them understand your level of risk because of your condition. It’s important to let your insurer know of your medical condition – while you can end up paying more for your life insurance, you’ll have a policy that covers you against the unexpected.
Putting your level term policy inside a legal entity called a trust is important and often recommended for two reasons:
It prevents the proceeds of a pay out becoming liable to inheritance tax
It prevents the pay out falling within your estate and becoming part of a process called probate – the distribution of your estate following your death
Putting your policy in trust also lets you name the people you want to receive your life insurance pay out, known as your trustees.
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