What is Level Term Life?
Level term life insurance is simply a life insurance policy that guarantees a level premium for a given period of years.
Level term life insurance has become much more common than the once popular annual renewable term life. Annual renewable term plans typically begin with a smaller premium but quickly increase each year as you get older. These plans have have almost become obsolete in the life insurance industry.
What makes Level Term Life so attractive?
Probably the most attractive feature of level term life insurance is the ability for a client to know exactly what their out of pocket costs will be over a period of time. This makes budget planning for these future costs much easier. Level term life insurance also allows an individual the ability to tailor their plan to their exact needs.
What Level Term periods are available?
Nowadays, you can pretty much design a level term plan to fit any planning needs. Whether it be locking in guaranteed level rates while the kids are growing up, protection while you pay down a home mortgage or perhaps coverage until the primary breadwinner retires.
The most common level term periods in the marketplace are 10 year, 15 year, 20 year and 30 year.
Can you lock in different level term periods?
Yes, we call this laddering. This is simply accomplished by purchasing multiple policies with varying duration’s. Each policy is matched to a specific need. This way, you can have the right amount of coverage at the right time-in a very cost effective manner.
Here’s an example of how laddering different level term life policies could work: Suppose Bill is age 45, in excellent health, and has a wife and two kids, ages 9 and 11. He has 10 years remaining on a mortgage, and wants to ensure that if he dies prematurely, his home would be paid off, his kids could attend college and his family would be financially secure.
Based on this example, we determine his life needs are the following:
AGES 45-55 $2 million life insurance covers the balance of his mortgage, future college costs, lost income and final expenses.
AGES 55-60 $1 million covers college costs, lost income and final expenses.
AGES 60-65 $500,000 covers lost income and final expenses.
Bill could purchase one $2 million 20 year level term policy that would take care of his needs. Over a 20 year period the total premium outlay would be approximately $44,900.
But, by simply laddering and purchasing 3 level term life policies based on the time frame the coverage is actually needed his total premium outlay would be only $25,000 over a 20 year period. This is almost a $20,000 premium savings over the course of the coverage period.
So, using are example, Bill could purchase a $1 million 10 year level term life policy, a $500,000 15 year level term life policy and a $500,000 20 year level term life policy.
It is very important to work with an agent that has the experience to know how to design your coverage properly.
What happens to the policy when the initial level period ends?
When most level term life policies come to the end of the initial level premium period the insured will get notified that their policy will adjust to an annually increasing rate. This rate can be dramatically higher than the initial level premium.
In most cases, the premiums after the initial level period has expired will be much too high to continue. It is very important that you work with a knowledgeable and experienced life insurance agent when purchasing term life insurance.
You must be sure to lock in guaranteed level rates for as long as you think you want the protection.
How can I compare different level term life plans?
Fortunately, you have landed in the right spot. As an independent life agent representing all of the top life insurance carriers in the marketplace you can find the best rates for level term life insurance here.
If you have any questions on how to ladder your level term life coverage or simply want to discuss your term life insurance needs, please contact us at 1-888-393-9003 or mike@specialriskterm.com
