Level Term Life Insurance: Pros and Cons

Fidelity Life: Shopping for a life insurance policy may seem daunting. Luckily, there are some easy-to-understand and affordable policies like level term life insurance that may be a great option to consider. Of course, as with any life insurance policy, there are pros and cons of level term life insurance. So for anyone considering a level term policy, here's the need-to-know information.

What is Level Term Life Insurance?

Level term life insurance is a popular life insurance policy with level premium payments and death benefit payouts for the entire term. This is markedly different from a decreasing term life insurance policy where the death benefit decreases as the term goes on. And it's much simpler to understand than a more complex whole life insurance policy that accrues cash value.

A level term policy is typically offered at various term lengths that often range from 10 to 30 years. And that means people can choose a term that makes sense for their financial situation. For example, a young couple having children may opt for a 30-year term policy that will expire once their children are full-grown and living on their own, therefore no longer relying on their parents for financial support.

Pros of Level Term Life Insurance

There are many benefits to level term life insurance policies that make them a great option for many people:

• Inexpensive: Level term policies tend to be a very affordable type of life insurance policy. That's because these plans are in place for a set period of years, and they don't accrue cash value. Younger healthy people may be able to lock in a term life policy at a great rate, even if their health declines as they age.
• Predictable: The primary benefit of a level term life insurance policy is that premiums and death benefits stay the same throughout the policy's term. That makes it easy to plan for budgeting and legacy planning.
• May be able to convert to permanent life insurance: After the term expires, the insured can choose to go without coverage if that makes financial sense. But they may also be given the option to convert the existing term policy into a permanent life policy. And that means guaranteed coverage for life as long as the policyholder continues to make premium payments.

Cons of Level Term Life Insurance

There are also some downsides of a level term life insurance policy to be aware of:

• Coverage ends when the term expires: The downside to any term life insurance policy is that coverage will cease at a certain point when the term is up. That's why it's important to know the options available for the policy, which may include renewing the policy for another term or converting to a permanent life insurance policy.
• Rate is locked in even if health improves: For someone working to improve their health, it's possible to get locked into paying a higher rate than necessary. This may be the case for someone who quits smoking a few years into a level term policy. Since tobacco use can drive up the price, the rate may be unnecessarily inflated for the remainder of the term, despite the policyholder's new non-smoking status.

The Bottom Line

For those interested in purchasing a level term life insurance policy, it's important to compare quotes. A reputable insurer like Fidelity Life offers many affordable level term life insurance options and can help connect people with the right policy for their situation. And that means peace of mind knowing that loved ones will be protected financially.