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If you have a family or loved ones who depend on your income, life insurance, also known as life cover, can provide for them should you pass away.
There are two main types of life insurance; term life insurance and whole of life insurance. A term insurance policy provides financial protection over a fixed period of time (the term). The policy pays out if you pass away during the term.
What is level term life insurance?
Level term life insurance is a type of term insurance policy. With level term life cover, you decide on the amount your loved ones will receive in the event of your death. The lump sum to be paid out stays the same for the duration of the policy and usually your premiums will stay the same too.
How many years does level term insurance cover me for?
You set the term at the beginning of the policy. The length of policy you decide on will depend on why you need cover. For instance, you might want it to last until your children finish full-time education or until your partner reaches pensionable age.
The cost of the policy tends to be lower if you take it out at an earlier age. This means it can be much cheaper to take out life cover under the age of 30 than waiting until later. A typical policy length is between 10 and 25 years, but policy terms can range anywhere from between five and 50 years.
Should I choose single or joint level term insurance?
Couples who both want to be covered might consider joint life insurance. Most joint term insurance policies only pay out once, on a ‘first death’ basis. After this, the plan ends and the surviving partner is no longer covered. At this point you may be in your later years, and our guide to life insurance for the over 50s explains what options are available.
If you have different protection needs from your partner - for example, if one of you has a much higher income than the other - it’s wise to have different levels of cover. Two single life insurance policies are often no more expensive than having joint cover and can mean that the surviving partner will still be protected.
If you’re not the main earner, you may think that you won’t need life insurance, but it’s a good idea to think about how your family would cope if you were to pass away. A payout can mean the family would be able to manage financially if your partner had to leave his or her job to look after children or other relatives.
It’s also a good idea to compare life insurance quotes with a number of providers to find a policy that suits your individual circumstances and budget.
What are the alternatives to level term insurance?
There are several different types of life cover that suit different situations. With decreasing term insurance, the lump sum to be paid out reduces over time. This type of policy can be suitable if you think the financial needs of your dependents will decrease as time goes on; for example, if the remaining balance of a mortgage is set to reduce in line with each year of the insurance policy.
Unlike term insurance policies, which cover you for a set period, whole of life insurance covers you for your entire lifetime and is also known as life assurance, as the payout is assured. Because they provide a guaranteed payout, these policies can be more expensive than term insurance policies, but provide peace of mind that a lump sum will be paid.
Critical illness cover is often bought as a package with life insurance. This provides a payout if you’re diagnosed with a serious illness.
Your needs may change over time, so it’s a good idea to review your protection insurance every now and then to make sure you have the right cover in place. If you’re unsure which insurance is right for you, you can speak to our expert team on 0800 862 0373.