Level Term Life Insurance

19/04/2021

Level Life Insurance pays out a lump sum if you die during the policy term. The benefit remains fixed over the life of the policy, so should a claim arise the amount paid out is the same whether it is in the first year of cover or the last.

How Does Level Life Insurance Work?

Level Life Insurance offers a fixed term policy that will guarantee a set lump sum tax free pay out when you die.

For example, if you were to take out a policy for 25 years with a sum assured of £100,000 and kept up to date with your premiums, your loved ones would receive the full lump sum of £100,000 if you died during that term regardless of when you passed away.

Death

Level Life Insurance will pay out on the death of the insured individual.

Terminal Illness

Most policies now include Terminal Illness Cover, which allows the benefit to be paid out early if you’re diagnosed with fewer than 12 months to live.

Critical Illness

Critical Illness Insurance is an optional add-on to the policy for an additional premium. It extends the scope of the cover to include a payout for serious illnesses also – the most common claims are for cancer, heart attacks and strokes.

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Do I Need Level Life Insurance?

The two most common uses for a Level Term Assurance policy are to protect an interest-only mortgage or to provide family protection.

However, it may also be used to protect a repayment mortgage. The longer the policy is in force, the larger the payout over and above the mortgage sum would be, providing an element of family protection as well.

If you have loved ones you’d like to protect or a mortgage you’re looking to cover, Level Term Life Assurance could be one option to meet those needs.

What’s the Risk of Passing Away?

Based on the Life Expectancy Calculator below, the chances of a healthy male passing away over a 25 year policy term are as follows:

Age 30

Age 40

Age 50

1 i n 18

1 in 8

1 in 4

How Much Does Level Life Insurance Cost?

The price of a Level Life Insurance policy will vary from individual to individual depending on their circumstances.

The main factors that will be priced into the cost of a policy are:

For example, if you are a 50-year-old smoker with a medical condition such as heart disease, your premiums will be a lot more expensive than a 30-year-old non-smoker who does not have any pre-existing health issues.

If you add Critical Illness Insurance to your policy, this will further increase the cost of cover.

Below are some sample monthly Level Life Insurance premiums for £250,000 worth of cover over a 20 year period for a healthy individual of various different ages.

Age

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🚬

Age 25

£7.28

£11.25

Age 35

£11.24

£20.62

Age 45

£23.27

£51.60

<a name="faqs"></a>Frequently Asked Questions

What's the Difference Between Level Life Insurance and Decreasing Life Insurance?

The difference between Level Life Insurance and Decreasing Term Insurance is how the benefit works over time.

While a level policy, as the name suggests, sees the benefit remain fixed over time, a decreasing policy falls over the life of the policy, reaching zero by the end of the policy’s term.

As Level Life Insurance doesn’t fall over time, it’s particularly suited for protecting an interest-only mortgage, where the outstanding mortgage balance also remains level over time.

It’s also used to provide a degree of family protection that doesn’t diminish over time.

Should I Add Critical Illness Cover?

With a Level Term Insurance policy you can tie in Critical Illness Cover as well, this means that you will be covered if you were to suffer one of a defined list of critical illnesses as per the insurer’s terms.

The Critical Illness Insurance element of the policy also remains level, meaning it will pay out a fixed amount over time.

On such policies, the main three claims are for cancer, heart attacks and strokes although Critical Illness Cover protects against a range of serious illnesses, including multiple sclerosis and Parkinson’s.

A typical policy will provide protection against the chances of you developing one of around 40 critical conditions, but there are policies which cover fewer than five illnesses and those which cover more than 100, so it pays to check the policy terms and conditions carefully.

Adding Critical Illness Cover to your Decreasing Term Insurance policy will increase your premiums because there is a much greater risk of you suffering a serious illness than there is of you dying.

What is Terminal Illness Cover?

Terminal Illness Cover is very different from Critical Illness Cover, although many people get the two confused.

Terminal Illness Cover pays out the Life Insurance benefit early if you’re diagnosed as terminally ill (usually defined as having less than 12 months to live).

This is opposed to Critical Illness Cover mentioned above, which will pay out on you developing an insurer-specified critical illness without the condition necessarily having to be terminal.

Single or Joint Policy?

Term Life Assurance can either be taken out as an individual policy or as a joint policy for a couple.

The latter is particularly useful where there’s a joint liability, such as a joint mortgage, that needs protecting.

However, it’s important to note that a joint policy will only pay out once, most commonly on the death of the first partner, and then cease. This potentially leaves the surviving partner without cover at a time where they may find it more difficult to take out cover again.

Depending on your circumstances, it may be more appropriate to take out two single policies. This will typically only cost a few pounds more per month but effectively provides twice the cover as you’ll receive a payout from both policies should both halves of the couple unfortunately pass away.

One payout could therefore be used to repay the mortgage while the other could be used to help support the family.

Should I Write My Life Insurance Into Trust?

Writing your policy into trust is a very important detail that often gets overlooked.

Doing so ensures your loved ones (the nominated beneficiaries) receive the Life Insurance payment promptly and tax free.

If a policy is not written into trust it can end up forming part of the deceased’s estate, where it may become chargeable for inheritance tax purposes.

Not writing your policy into trust can significantly increase the time it takes for the benefit also due to it potentially having to go through probate.

Compare Best 10 UK Life Insurance Companies

Below is an overview of some of the top Life Insurance companies in the UK comparing some of the key details of their policy terms.

Aegon

Aegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.

  • Minimum entry age: 18
  • Maximum entry age: 89
  • Minimum term: 1 year
  • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited

AIG

US insurance giant American International Group, Inc. (AIG) was first founded in 1919 and since then has grown to operate on a global scale. It provides a range of protection products for both individuals and businesses.

  • Minimum entry age: 18
  • Maximum entry age: 88
  • Minimum term: 2 years
  • Maximum term: 70 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited

Aviva

Aviva was founded in 1797, but the Aviva brand as it is today was formed in 2000 by the merger of Norwich Union and CGU PLC.

  • Minimum entry age: 18
  • Maximum entry age: 89
  • Minimum term: 1 year
  • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited

Guardian

Guardian is a relaunched protection brand with a number of unique features to its policies.

  • Minimum entry age: 18
  • Maximum entry age: 65
  • Minimum term: 1 year (Level and Increasing Cover) / 5 years (Decreasing cover)
  • Maximum term: 72 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: £15 million

Legal & General

L&G was formed as an insurance company for lawyers, by lawyers in 1836. It has since grown to become one of the country’s best-known financial services companies

  • Minimum entry age: 18
  • Maximum entry age: 77
  • Minimum term: 1 year (Level Cover) / 5 years (Decreasing cover)
  • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited

Liverpool Victoria

LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.

  • Minimum entry age: 17
  • Maximum entry age: 79 (Level or Decreasing cover) / 59 (inflation-linked cover)
  • Minimum term: 5 years
  • Maximum term: 45 years
  • Maximum cover: Unlimited

Royal London

Royal London previously operated Scottish Provident and Bright Grey as separated brands providing Critical Illness Insurance under the Royal London umbrella. From 2016, both were merged into the main Royal London brand.

  • Minimum entry age: 18
  • Maximum entry age: 70
  • Minimum term: 1 year
  • Maximum term: 72 years
  • Maximum cover: Unlimited

Scottish Widows

Founded in 1812, Scottish Widows is today part of Lloyds Banking Group.

  • Minimum entry age: 18
  • Maximum entry age: 79 (must end before individual’s 90th birthday)
  • Minimum term: 1 year (Level and Increasing) / 3 years (Decreasing)
  • Maximum term: 72 years
  • Maximum cover: £25,000,000 (Level and Decreasing) / £15,000,000 (Increasing)

Vitality

Vitality entered the UK market in 2007 with a joint venture with PruHealth and PruProtect, part of the Prudential Group. It has since bought out Prudential and is now branded solely as Vitality.

  • Minimum entry age: 16
  • Maximum entry age: 74 (cover must end before age 90)
  • Minimum term: 5 years
  • Maximum term: No maximum (cover must end before age 90)
  • Maximum cover: £20,000,000

Zurich

Zurich is a Swiss-based global insurance giant, operating in more than 170 countries. It employs around 55,000 employees worldwide, including 4,500 in the UK.

  • Minimum entry age: 16
  • Maximum entry age: 83 (must end before individual’s 90th birthday)
  • Minimum term: 1 year
  • Maximum term: 50 years
  • Maximum cover: £40 million

Get Level Life Insurance Advice

Whatever you need Level Life Insurance for, it’s worth speaking to an expert to ensure you get such an important policy right.

The team at Drewberry can help you decide on a level of cover that’s appropriate for you, advise on whether you need to write the policy into trust and the pros and cons of adding Critical Illness Insurance to the policy.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

We offer Life Insurance advice on a fee-free basis. We are here to make sure you can make an informed decision and take out the most suitable cover.

If you need any help then please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Robert Harvey
Independent Protection Expert at Drewberry

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