Updated: October 18, 2024
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Level term life insurance is a type of term life insurance that provides coverage for a specified period, typically between 10 and 30 years. The term "level" indicates that the premium payments and the death benefit both remain constant throughout the duration of the policy.
Ideal for people seeking straightforward protection, a level term life insurance policy is particularly well-suited for those with defined financial obligations like a mortgage, educational expenses or family support needs.
Level term life insurance is a type of term life insurance that helps pay debts, replace income and cover costs for your family and dependents if you pass away.
Term lengths are typically fixed periods of 10, 20 or 30 years.
Premiums and death benefits remain level throughout the policy term, meaning you’ll pay the same amount each month and your benficiaries receive the same benefit no matter when you pass away.
Like other types of life insurance, the primary purpose of level term life insurance is to provide for your family if you pass away. Level term life insurance can cover costs like debts and funeral expenses, replace your income and help cover ongoing expenses for your family and dependents.
For example, if you’re married with two young children and a mortgage, a 30-year level term life insurance policy could be a worthwhile investment for your family. Even a 10-year level term life insurance could also be a good option if your family prefers a shorter term. This ensures that your family will have a financial cushion to rely on if you pass away while they still have significant financial obligations.
Level term life insurance policies are the most common type of term life insurance policies. With this policy type, both the death benefit and the premium remain the same over the policy's term. It is often more affordable than other policy types in the long run while providing a stable amount of coverage throughout the life of the policy.
Two main features of level term life insurance remain "level": your monthly premium and your death benefit. Both of these amounts remain constant throughout the policy's term.
Level Benefits
Level term life insurance is also sometimes called level benefit term life insurance because the death benefit stays the same throughout the policy’s life and does not decrease over time. This means that your family will receive the same benefit amount regardless of when you pass away, as long as it's during the life of the level term life insurance policy.
Level Premiums
Life insurance premiums generally increase as you age because you pose a higher risk to life insurance companies as you age. A level term life insurance policy keeps your premiums level throughout the term. If you take out a 20-year term life insurance policy, you'll pay the same premium for the next 20 years, with no increases.
Laddering is a technique used by life insurance shoppers to purchase multiple types of insurance coverage that expire at different times. Adding various policies with varying terms is one way to get your ideal coverage level.
For example, say you're 30 years old with children, student loans and a mortgage. You might expect to pay off your loans in the next 10 years, provide for your children for the next 20 years and pay off your house in the next 30 years. After that, you might expect your costs to decrease. You could have the following ladder that accounts for your decreasing costs:
In this example, your death benefit will decrease by $500,000 — and your premiums will be reduced — every 10 years. If you passed away in the first 10 years, the combined benefits from the three policies would be $1.5 million, but if you died in 25 years, the benefit would be $500,000. Laddering is one way to balance the cost of life insurance with your family's changing needs over time.
The average cost of a 10-year level term life insurance policy with $250,000 in coverage for a 40-year-old is $18 per month. A 20-year level term plan for the same policyholder profile costs an average of $26 per month. Actual rates may vary based on individualized factors.
Life insurance companies calculate the cost of a level term life insurance policy based on personal and policy-specific factors. Insurers consider age, health status, lifestyle choices such as tobacco use, and the length and amount of coverage when determining premiums. The younger and healthier you are, the lower the premiums tend to be. The policy's term length also plays a huge role — the longer the term, the higher the premium, as the insurer takes on a greater risk over an extended period. The death benefit amount you choose also directly influences the cost; higher coverage amounts lead to higher premiums.
The table below shows a snapshot of average monthly costs for 10-year term life insurance with different coverage amounts and for different ages.
| 30-Year-Old | $14 | $20 | $35 |
| 40-Year-Old | $18 | $29 | $53 |
| 50-Year-Old | $37 | $65 | $117 |
| 60-Year-Old | $76 | $141 | $271 |
| 70-Year-Old | $204 | $410 | $719 |
Below are average monthly costs of 20-year term life insurance policies for different ages and coverage amounts.
| 30-Year-Old | $17 | $28 | $50 |
| 40-Year-Old | $26 | $44 | $83 |
| 50-Year-Old | $58 | $106 | $203 |
| 60-Year-Old | $150 | $286 | $556 |
| 70-Year-Old | $752 | $1481 | $2988 |
It's not always wise to take out the cheapest life insurance policy you can find — in some cases, a 20-year level term life insurance policy with $500,000 to $1 million in coverage may be ideal. The best life insurance policies provide adequate coverage for your loved ones, while the cheapest life insurance policies may have more limited coverage.
If you’re not sure which type of life insurance is best for you, consult a financial advisor to make sure that you select the best policy for your situation.
Level term life insurance is one of the most popular types of term life insurance policies. It's best for those who want stable coverage over the long term and those with children, spouses or other dependents.
Weighing level term life insurance advantages and disadvantages can help you make an informed decision and ensure you choose the right policy type.
Level term life insurance is often a good choice, providing stable premiums and death benefits over the term. These policies are relatively affordable and ensure that your family will have a financial cushion if you're no longer around to provide for them.
However, there are a few drawbacks to this type of policy. If you're already in poor health when you take out the insurance, your premiums will likely be higher.
Since benefits and premiums remain the same over the policy's life, you won't be able to adjust them if your financial circumstances change. The coverage also expires after a certain period, so you'll likely need to purchase a new policy at a more expensive rate if you end up needing coverage for longer.
Determining whether you need level term life insurance involves assessing your financial responsibilities and the wellbeing of those who depend on you. This policy type is a strategic choice for securing a financial safety net within a defined period.
You may find a level term life insurance policy a viable option if:
You’re married
If you’re married or in a long-term partnership, level term life insurance can help ensure that your spouse or partner is provided for if something were to happen to you in the next 10 to 30 years (depending on the policy term). Level term life insurance can help cover funeral costs, replace your income and provide financial support during a difficult time.
You have children
Parents should consider purchasing a level term life insurance policy to provide for their children in the event of their passing. The death benefit from level term life insurance can be used to ensure your children have the funds they need for housing, school and other costs while they're still your dependents.
Other family members depend on your income
Spouses and children aren’t the only family members who may depend on your income. If you support other family members, like your parents or siblings, you should consider purchasing a level term policy to protect them financially.
You have debts
Level term life insurance can also be used to pay down debts in the event of your passing. For example, if you have a mortgage, your loved ones could use the death benefit to pay down the mortgage after you pass away.
While level term life insurance is a good option for many, it may not be the best choice for everyone. You may not find level term life insurance ideal if:
Securing a level term life insurance policy is a straightforward process designed to align with your specific financial needs and goals. Here’s a step-by-step guide to acquiring coverage:
Evaluate your financial situation to determine the amount of coverage that would be necessary to protect your dependents. Consider debts, income replacement and future obligations like education costs.
Decide on the term that best matches the period of your financial obligations. Common terms are 10, 20 or 30 years.
Obtain level term life insurance quotes from multiple insurance providers to compare rates. Be prepared to provide some personal information, including your health history and lifestyle habits.
Some insurers may require a medical exam to assess your health status, which can affect your premium rates.
Carefully examine the level term life insurance policy's terms, including the premium amounts, death benefit and any exclusions or conditions. This helps ensure you select the best level term life insurance for your needs.
Fill out the insurance application with accurate information to avoid any issues with future claims.
The insurer will review your application and medical exam results to decide whether to offer you coverage and at what cost.
Once approved, sign the policy agreement and make the initial premium payment to start your coverage. Opting for a guaranteed level term life insurance ensures your premium remains unchanged throughout the policy term.
When it comes to level term life insurance, “level” can be used to refer to either the premium or the benefit (or both). In most cases, both the premium and the benefit are level, meaning they don’t change over time.
In some cases, a policy may have a level premium or a level benefit, but not both. Before you purchase a policy, it’s important to clarify exactly the meaning of level term life insurance for your insurance provider, and how your costs and benefits may change over time.
For those whose insurance needs may extend beyond the fixed term of level term life insurance, considering alternative options is a strategic step to ensure long-term financial protection.
Whole Life Insurance
A permanent life insurance option, whole life insurance, provides a death benefit and builds cash value over time, offering a combination of financial security and potential for cash accumulation.
Universal Life Insurance
With the ability to adjust premiums and death benefits, universal life insurance offers a flexible solution that adapts to changing financial situations throughout one's lifetime.
Decreasing Term Life Insurance
Tailored to match the declining balance of obligations like a mortgage, the death benefit of a decreasing term life insurance policy decreases over the term, often resulting in lower overall premium costs.
Convertible Life Insurance
This option provides the flexibility to convert your term policy into a permanent one, securing lifelong coverage without additional health examinations.
Renewable Term Life Insurance
Ideal for those who may need short-term coverage extended, this policy can be renewed at the end of the term without a medical exam, though premiums may increase.
To ensure you choose the best insurance product for your needs, compare level term life insurance with these alternatives, assessing each option’s features, benefits and costs. This comparison will help you make an informed decision that aligns with your long-term financial goals and coverage needs.
Whether level term life insurance is right for you depends on your specific needs and circumstances. MoneyGeek answers some of the most common questions concerning level term life insurance to help you make an informed decision.
Level term life insurance is a type of term life insurance policy where the death benefit and premium stay the same over the policy’s term, generally either 10 years, 20 years or 30 years.
Level term life insurance may be a good fit if you’re married, have children or financially support other family members.
Level term life insurance costs vary depending on the coverage amount you select, your age and your health, among other factors.
For instance, a 40-year-old male who does not smoke and has excellent health pays an average of $18 per month for a 10-year term policy with a $250,000 coverage amount. The average cost of a similar policy for a 30-year-old with the same profile is $14 per month, while a 70-year-old will likely pay an average of $204 monthly.
Both level and decreasing term life insurance have their uses. Level term life insurance is recommended if you’re looking for long-term coverage for yourself and your family. Decreasing term life insurance may be better if you’ve recently taken on a large financial burden, like a mortgage or car loan, but expect your costs to decrease over time.
A 10-year level term life insurance policy provides a decade of stable coverage with unchanging premiums and death benefits, ideal for covering shorter financial commitments or transitional life stages.
A 20-year level term life insurance policy offers a fixed premium and death benefit for two decades. It suits those with mid-term financial responsibilities like raising children or paying off a mortgage.
Buying level term life insurance for seniors can be beneficial, especially if they have ongoing financial obligations or wish to secure estate plans. It can be a prudent choice for ensuring family stability.
About Margaret Wack
Margaret Wack, a contributing journalist at MoneyGeek, is an award-winning poet with over six years of editorial experience in digital publications. She writes about insurance, saving, investing and banking, with bylines on Money Under 30 and Bankrate.
Wack earned her Bachelor of Arts in Classics, Comparative Literature and Poetry from Smith College and her Master of Arts from St. John's College.
