Level Term Life Insurance

Level term insurance offers term life insurance with premiums that remain level for a certain number of years. Commonly, level term is offered with guaranteed level premiums of 5, 10, 15, and 20 years: Most level term policies are more expensive than YRT in the first few years. However, if you are planning to keep your life insurance for 5, 10, 15, or 20 years, level term will end up being far less expensive than a single Yearly Renewable Term (YRT) policy.

Level term policies are usually renewable after the initial term (5, 10, 15 or 20 years). This means you can renew the coverage at the end of the term if you are willing to pay more premiums. Keep in mind that at the end of your initial term the premiums will have gone up significantly. Some level term policies are not automatically renewable at the end of their term. These policies should generally be avoided.

Unless it is considerably more expensive, our consultants recommend purchasing a level term policy with a conversion option. This option will allow you to convert to cash value life insurance without evidence of insurability (no medical exam or questions need be completed). This option becomes very important if you decide to keep your life insurance beyond the initial term of the policy, and your health has deteriorated.

After the initial term (5, 10, 15 or 20 years) a level term policy will often become a YRT policy, with premiums that rise annually. Alternatively, some level term policies will continue, but at a higher level premium for some period of years. For example, a 10-year level term policy might have a rate increase in the eleventh year. The rate increase might result in another premium that is level for ten years. When a level term policy reaches the end of its initial term, the policy should be re-priced. If a re-entry premium is offered and you are still in good health, this may be your best option. At the same time, you should look at what else is available on the marketplace. Before changing any life insurance policy, an insured person should consider the pros and cons of replacement.

The National Association of Insurance Commissioners has adopted a piece of legislation (Measure XXX) that will probably affect insurance companies in 1996 or possibly 1997. The result of this measure will be markedly higher level term life insurance prices for consumers. Because of this, our consultants recommend that buyers of term life insurance lock in their insurance rates by buying level term before the measure takes effect in your state. If your health is good, you should consider buying a level term policy for as long as you will need life insurance.