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Understanding Level Term Life Insurance

Level Term Life Insurance

Level term life insurance is not too difficult to understand. Generally speaking, it is a term life insurance that offers affordable protection and a fixed rate from the beginning to the end of the policy. 

This article will help you understand how level term life insurance works and the benefits that can be obtained from it.

Level term life insurance is a policy where the death benefits remain the same for the life of the policy, regardless of when the insured person dies. This means that the same amount will be paid to the beneficiaries even if the person dies in the first year or at the 28th year of your 30-year term policy. 

Unlike permanent life insurance or universal life insurance, term life insurance matures after the term expires without accumulating the monetary benefit over time. This makes it a convenient life insurance policy and why it is the most popular life insurance policy available. 

There are different types of term life insurance. Most are level term life insurance, which means that your premiums, payments, and death benefits remain the same throughout the policy. With this, you can rest assured that you will be providing a safety net for your family as you have many options to choose from in terms of policy term and coverage amounts. 

The Benefits of Level Term Life Insurance

Level term life insurance is ideal for most individuals and their families because the coverage is affordable and flexible. Here are some of the benefits you can get from level term life insurance:

      • Prevention: This is one of the main benefits of level term life insurance because, from the start, you know the amount you will leave to your beneficiaries no matter when you die. This gives you the opportunity to prevent and plan for what can be done with that value in the future.
      • Level premiums: In addition to the level benefits of level term life insurance, the premiums are also level. So the amount you pay each month is the same no matter how much time has passed since the inception of the policy. This can change if you make a modification to the policy. 
      • Flexibility: Because in term life insurance you pay the same amount and receive the same coverage for the life of the policy, you can choose the years of coverage you believe are convenient for your needs according to your state of health. You can choose between 10 or 30 years of coverage according to your needs. 

The Level Premium System of Life Insurance

The level premium system of life insurance is a type of term life insurance where payments are guaranteed to remain the same throughout the contract while the amount of coverage increases. In other words, level premium permanent insurance accumulates a reserve that will eventually be advantageous because you will have access to more coverage as the policy matures.

At times, they can be confusing, but the two options go hand in hand. Specifically, a level premium system of life insurance is level term life insurance with level premium payments. 

Express Term vs. Traditional Term Life Insurance

Express term life insurance is a term life insurance policy that does not require a medical exam to apply for and it is possible to apply and get approved quickly. The express term policy offers coverage up to $250,000, which is applied for online, and notification of approval is received in an hour or less.

In contrast, traditional term life insurance can only be applied for through an agent and, as well, you may have to wait several weeks for approval. With traditional term life insurance, however, you can get much more coverage and a lower rate. 

Another big difference is that traditional term life insurance can be converted to a term life insurance refundable premium. This is a rider that you can add for a higher insurance policy, but if you outlive the term of the policy the premiums paid will be returned to you. Even if you wish to cancel the policy before maturity, you will receive a refund of the premiums paid. 

It is important to mention that this clause is only available for people under the age of 65 who are purchasing a policy with a minimum coverage of $100,000 for a term of 15 years or more. 

Here is a table with the main differences between express term life insurance and traditional term life insurance. 

Express Term Life Insurance Traditional Term Life Insurance
Term lengths 10, 15, 20, 20, 25 or 30 years 0, 15, 20, 20, 25 or 30 years
Coverage amount $25,000-$250,000 $50,000+
Age availability 18-75 years old (coverage ends at age 95) 18-75 years old (coverage ends at age 95)
Application process
    • Apply online 
    • No medical exam
    • Approval can be same day
    • Requested through an agent 
    • Medical exam required
    • Up to six weeks to process

Decreasing Term Life Insurance

Decreasing term insurance is renewable term life insurance with coverage that decreases over the life of the policy at a predetermined rate. Premiums are usually fixed throughout the policy and reductions in coverage occur monthly or annually. Terms usually range from 1 to 30 years depending on the insurer and the plan offered. 

Decreasing term insurance alone may not be sufficient for an individual’s insurance needs. Often a declining term life policy is purchased to protect personal assets rather than family members. Some small businesses often purchase this type of term life insurance to protect indebtedness against start-up costs and operating expenses. 

In the event of the death of a member of a small business, the death benefit of the decreasing term life insurance can help fund ongoing operations or help cover a percentage of the remaining debt the member may have owed during his or her lifetime. 

Final Thoughts

Term life insurance is less expensive than traditional term life insurance and therefore may be more attractive.  Sometimes the information about term life insurance is confusing and you may be offered an incorrect decreasing term life insurance, so you should be careful and get information from a reliable agent. 

Featured Image: Megapixl

About the author: Matthew is a financial writer, essayist, and editor of several publications. He writes books for fun and travels as a challenge to see every country.

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