Guide
What is level term life insurance?
Life insurance policy provides your loved ones with a cash lump sum when you pass away or if you’re diagnosed with a terminal illness. They can use the money for anything, like paying off a mortgage and funeral costs.
Level term life insurance pays out a fixed amount of money. The payment won’t increase or decrease throughout the duration of the plan. It therefore stays level.
What’s the difference between term life insurance and level term life insurance?
Level term life insurance is a type of term life insurance. Term life insurance covers you for a chosen number of years, which is called the ‘term’ of the policy.
So, if you take out a level term life insurance policy for 30 years, and you die within that time, your beneficiaries will receive a cash lump sum. If you die outside of this period, then they won’t receive anything.
With level term life insurance, the cash lump sum payout is fixed when you take out the plan. And it won’t change throughout the years unless you decide to alter the amount. There are other types of term life insurance where the payout increases or decreases over time.
Learn more: Term Life Insurance Explained
Compare different life insurance policies
Let’s have a look at how different types of term life insurance policies and how they compare.
Level term vs increasing term life insurance
|
|
Increasing term life insurance |
Level term life insurance |
|
Payout on death |
Increases each year. |
Stays the same. |
|
Suitable for |
Day to day expenses that increase as the cost of living rises. |
Debts that don’t increase, like an interest only mortgage. |
|
Cover |
Cover keeps its real value over time. Protects your family’s future needs. |
Should provide enough cover throughout the plan as long as the debt doesn’t increase. |
|
Premiums |
Monthly payments increase as the cover increases. |
Stay the same throughout the term of the plan. |
|
Cash in value |
No cash in value. When the plan ends so does your cover. |
No cash in value. When the plan ends so does your cover. |
Level term vs decreasing term life insurance
|
|
Decreasing term life insurance |
Level term life insurance |
|
Payout on death |
Reduces each year. |
Stays the same. |
|
Suitable for |
Debts that reduce over time, like a repayment mortgage. |
Debts that don’t reduce, like an interest only mortgage. |
|
Cost |
Tends to be cheaper than other types of life insurance. |
Very affordable depending on your age. |
|
Cover |
May not provide enough cover as you get towards the end of the plan. |
Should provide enough cover throughout the plan as long as the debt doesn’t increase. |
|
Premiums |
Stay the same throughout the term of the plan. |
Stay the same throughout the term of the plan. |
|
Cash in value |
No cash in value. When the plan ends so does your cover. |
No cash in value. When the plan ends so does your cover. |
Learn more: What is decreasing term life insurance?
Level term vs whole of life insurance
|
|
Whole of life insurance |
Level term life insurance |
|
Payout |
Guaranteed on death as long as premiums are paid. Won’t pay out for terminal illness. |
Pays out only during the term of the plan. Will also pay out if you’re diagnosed with a terminal illness while the plan is in place. |
|
Length of plan |
Lasts for the whole of your life. |
You can choose how many years you want the plan in place for. |
|
Suitable for |
People who want to cover their funeral costs. People who want to pay an inheritance tax bill. |
Families with dependants. People with debts such as a mortgage. |
|
Cost |
Monthly premiums will probably be higher as the payout is guaranteed. |
Very affordable depending on your age. |
|
Premiums |
May increase if you choose indexation to protect against inflation. |
Stay the same throughout the term of the plan. |
|
Cash in value |
Some policies allow you to cash in the part of the policy that’s been invested. |
No cash in value. When the plan ends so does your cover. |
Learn more: Whole of life insurance explained
How much level term life insurance do I need?
It’s important to think carefully about the amount of life insurance you need. The payout from level life insurance stays the same throughout the term of the plan. This means you need to make sure the amount is suitable to cover all the costs your beneficiaries will be using it for – now and in the future. Things to think about include:
Mortgage and debt repayments
Will the amount you choose at outset be enough to cover paying back your debts during the lifetime of the policy?
Family expenses and replacing lost income
If you’re taking out the plan to give your family a financial safety net, think about your monthly outgoings. And how long you expect the lump sum to last. You could choose a payout that covers a year or more of your lost income.
Funeral expenses
With the average cost of a funeral £4,2851 many people choose to take out an insurance plan to contribute towards the cost. As funeral costs rise, you can consider increasing your cover.
Can I get joint level term life insurance?
Yes, you can. Joint level term life insurance covers two people on the same policy but only pays out once. If you or your partner die whilst the policy is in place, the other will automatically get the payout. The policy then ends, so the surviving partner is no longer covered by the insurance.
A joint life policy is often taken out by people who have joint finances. If one partner dies, the other can pay off any debts with the payout. There’s no need to be married or in a civil partnership to get joint life insurance. A policy can be set up for two individuals regardless of their marital status. For example, friends who share a mortgage can have joint life insurance.
Learn more: Single or joint life insurance – which is better?
*Vitality Claims and Benefits Report, 2024
1 Source: Cost of dying 2025 report, SunLife
Vitality life insurance
Want to know more about life insurance or thinking about taking out a policy? Here are some of the benefits of taking out life insurance with Vitality:
- A brand you can trust - In 2023, we paid out 99.7% of life insurance claims. *
- Get a lower monthly premium upfront when you add Optimiser to your plan. Keep your premiums low when you stay active.
- Access to Vitality partner discounts and rewards.
- Get free no-obligation advice. Our advisers offer expert advice to help you make the right decisions.
Level term life insurance FAQs
What happens at the end of a level term life insurance policy?
When the policy comes to an end, your monthly payments to the insurer will stop. You are then no longer covered by the insurance. If you wish to carry on your cover, you’ll need to apply again.
Do I get money back if my level term life insurance policy is terminated?
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