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.
- It is particularly suited to covering an interest-only mortgage, where the outstanding mortgage balance doesn’t fall over time.
- It’s also useful for providing family protection, as the sum paid out is the same across the policy term.
- Opt to include Critical Illness Insurance to provide a cash lump sum should you suffer a serious illness, such as cancer.
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.
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:
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:
- Your age
- Your state of health
- Your smoker status
- How much you want to insure yourself for
- The length of the policy term.
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.
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.
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.
- There is no fee for our service
- We are independent and impartial
Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
- We’ve got bargaining power on our side
This allows us to negotiate better premiums for you than you going direct yourself.
- You’ll speak to a dedicated expert from start to finish
You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
- Benefit from our 5-star service
We pride ourselves on providing a 5-star service, as can be seen from our 3900 and growing independent client reviews rating us at 4.92 / 5.
- Gain the protection of regulated advice
You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
- Claims support when you need it the most
You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
