Definition of Level With Term Life Insurance

Level term life insurance is a term life insurance policy with level premiums and a level death benefit. This type of term life insurance differs from an annual renewable life insurance policy or a decreasing term policy, where the policy premiums or death benefits change every year.

Benefits

With a level premium and death benefit, you can be certain what your insurance costs are in advance. You are also certain of how much death benefit you have because the benefit does not increase or decrease over the course of the term.

Significance

The insurance company charges you more than the actual cost of insurance. Then, the insurance company invests the excess premium to hold down the future cost of insurance.

Effects

A level term life policy tends to be much less expensive over time than an annual renewable term life policy because part of the premium is invested on your behalf to hold down the future costs of insurance.

References

• "Life Insurance"; Kenneth Black, Jr., Harold D. Skipper, Jr.; 1994
• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007