Term Life Insurance

What are Level-Premium Term Life Insurance Policies?

A level-premium term life insurance policy promises a fixed rate for the duration of your policy. Since the policy lasts for a certain amount of years, you never have to worry about a premium hike during that time, and you can enjoy the low cost you were quoted at the beginning. 

Consider this. Someone picks out a 20-year term for their $100,000 death benefits with a small premium paid monthly. They have the security of knowing that for 20 years, they’ll never be responsible for a higher payment even as their health and lifestyle may change. No matter how much time passes within the term of the policy, the rate stays the same.

These policies typically come in five- or 10-year blocks, and you can often get a fixed-term, level-premium life insurance policy up to 30 years for the amount of benefits that you think is right. Despite changes to your life, medical history, or the insurance market, your rate is fixed. Here’s how it works.

Understanding How Level-Premium Term Insurance Helps

In truth, level-premium term insurance initially starts out with a higher premium than other, variable term policies might. In part, this can be deceptive because though they are higher at the start, variable rates quickly outpace them as the probability of mortality increases for the insured. As you age, you assume more risk for the insurance company, and they raise your premium as a result.

While you might see the higher rate and think that it’s a drawback that would make you turn away from the insurance, think about the future. Choosing the slightly higher rate, in the beginning, turns into an advantage in the end when other policies raise premium costs each year, making it harder to maintain essential insurance for some. You never have to worry about more expenses with level premiums. Instead, it’s very clear how things work, and it keeps the policy simple to keep active. 

In fact, a higher initial premium that’s level can actually mean saving quite a bit of money. Even the lowest, variable premium rates can rise above a level premium within a few years, cutting into the potential gain of benefits since term insurance benefits never change or accrue cash value. Let’s compare these level premiums to initially lower premiums a bit more.

Comparing “Lower” Premiums to Level Premiums

Shopping for life insurance is not as simple as seeing the lowest number for a premium rate and deciding to apply. Some may see that low premium and think they are stealing a deal on insurance, but they could be getting themselves into an agreement that won’t serve them as well as a more calculated decision to look below the appearance of things. Considering level or variable premiums is one crucial point for such an insurance seeker.

What you have to do is consider the value of the policy and its benefits over time compared to the costs you pay. By definition, term policies never change in value as a whole or universal policy might by gaining value over the years. That means what you pay for is what you get. And, if you pay a higher price year after year with a variable premium rate, the value of your policy as a whole is changed. With a level premium, by contrast, you know you maintain the value of the policy with both premiums and benefits being fixed.

This point is important for those who are just learning the ins and outs of life insurance since many may forget how rates can change by several factors. For instance, these could have a big impact:

  • your age
  • any emerging health concerns
  • possible lifestyle changes
  • the age of the policy itself 

Medical problems, advancing age, and habit changes can all increase mortality rates and drive premiums up (while death benefits remain the same). 

Pick Level-Premium Term Insurance through Sproutt

Anyone who seeks life insurance is interested in the future and in minimizing, as much as possible, the pain and discomfort of losing the insured. It’s a protective mechanism for beneficiaries (like children, partners, and other parties) that promises an income to them in the worst-case scenario. That’s why it makes sense to many people to choose a level premium. Thinking ahead, they see that a level rate can mean saving money on life benefits and its guaranteed death benefits.

Sproutt helps savvy insurance seekers find the best coverage for the lowest possible rates through industry insight and advanced technologies. You can find the ideal level-premium term life insurance with their simple-to-use, online quoting tools. Check out Sproutt.