Level term life insurance

Level term life insurance is the most straightforward way to get life cover. For this reason, it's also the most popular. If the worst happens and you pass away, you know exactly what your loved ones will receive. In this article, we'll explain what it is, how it works and why level term may be right for you.

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What is life insurance?

Life insurance is a type of insurance cover that aims to provide financial security for the policyholder's loved ones if they pass away or contract a terminal illness.

When you take out a life insurance policy, you pay a monthly premium to your insurance company to guarantee your cover. Then, if you pass away and your cause of death is covered, your insurer will pay out a fixed lump sum to your nominated beneficiaries (called the death benefit). Your policy will also pay out if you're diagnosed with a terminal illness (with a life expectancy of 12 months or less).

People like to have life insurance because it provides peace of mind. It's great to know that if the worst happens, you've done everything you can to support your loved ones and make a difficult time a little bit easier.

There are several different types of life insurance available. Each works in a slightly different way.

What is level term life insurance?

Level term is a type of life insurance and part of the term life insurance family of products.

Term life insurance is a type of policy that lasts a specific length of time, called the term. You select the length of the policy term when you first take out your life insurance. It could be 5 years, 20 years or even more.

If you pass away during the pre-selected term (and you've kept up with your premiums), your insurer will pay out a lump sum to your nominated beneficiaries.

Level term life insurance is so-called because the amount of cover on your policy stays the same throughout the term. Your death benefit would be the same if you passed away during the first year of your policy term or the last.

People take out level term life insurance policies for a variety of reasons including:

  • Paying off a mortgage if they pass away
  • Pay funeral costs
  • Support loved ones with household bills and keep them in their current lifestyle

How does level term life insurance work?

Level term is the most popular type of life insurance as it's so straightforward.

First, get quotes from a range of insurers. Choose your term and your amount of cover. You may have to answer some questions about your medical history. Select the policy that's right for you.

Now, all you have to do is pay your premiums. As it's level term, you know your premiums will stay the same throughout the term of the policy.

You're covered - and providing financial support for your loved ones if you pass away or are diagnosed with a terminal illness. Your policy ends when it pays out, or the term expires, whichever is sooner.


You want a cover amount of £150,000 and a term of 20 years. You select a policy with a monthly premium of £15.

Every month for the next 20 years, your insurance company will take £15 from your bank account.

If you pass away (or contract a terminal illness) during the 20-year term, your insurer will pay your nominated beneficiaries a lump sum of £150,000.

If the 20 years elapse and you're still alive, your policy will end and you will not pay anymore. (However, you don't receive any money back)


  • 97% of term life insurance claims are paid by the insurance company - Source

Life insurance covers most circumstances of death, but there will be some exclusions in the terms of the policy. Exclusions may include:

  • Genetic or pre-existing conditions that you failed to disclose at the start of the policy
  • Alcohol or drug abuse
  • Death while committing a crime
  • Accidents while participating in dangerous sports
  • Suicide (some policies exclude death by suicide for the first year of the policy)

Critical illness cover

You can add critical illness cover to your level term life insurance for an additional cost.

Critical illness cover pays out a portion of your cover amount if you are diagnosed with a serious illness such as cancer, heart attack or stroke.

At the start of your policy, your insurer will give you a list of critical illnesses that they cover. If you're diagnosed with an illness that's included, you can make a claim.

Critical illness cover can be useful if you and your family are reliant on your income and you wouldn't be able to earn money if you were critically ill.

Single or joint policy

It's also possible to take out a joint level term policy with your partner that will cover you both in the event of one of you passing away.

A joint policy only pays out once during a term, usually when the first person passes away. After this, the policy ends and the surviving partner is no longer covered.

People often take out joint policies if they have outstanding financial commitments like a mortgage, or if they have children. Joint policies are usually more affordable than single life insurance policies.

Alternatives to level term insurance

Other types of term life insurance policy are:

  • Decreasing term life insurance - The amount of cover reduces over the length of the policy. It's handy for covering a repayment mortgage or interest-only mortgage where the outstanding amount decreases over time
  • Increasing term policies - The cover level increases over time (as do your monthly premiums). This safeguards the purchasing power of your cover amount against inflation
Father's and his son holding hands at sunset field. Dad leading son over summer nature outdoor.

Benefits of level term life insurance

Life cover is a great thing to have because it provides financial protection for your dependents if the worst happens and you pass away. Your loved ones can also use your life insurance payout to pay for your funeral. Whatever they choose to do, it's great peace of mind for you.

However, there are some benefits specific to level term life insurance.


When you know exactly how much your premiums are every month, it's easier to budget. With guaranteed premiums, your monthly payments stay the same, so it's easy to allocate your income to ensure your cover stays intact.

peace of mind

When you take out level term life insurance, you know exactly how much money your family would receive if you pass away during the set period.

  • The average life insurance policy payout in 2021 was £22,900 - Source

Great for covering ongoing payments

Your loved ones can use your life insurance payout for anything they choose. However, level term cover is great for meeting everyday living expenses such as household bills.

You can also use your life insurance benefit to cover your interest-only mortgage, repayment mortgage, school fees or any other debts or ongoing payments.

Disadvantages of level term life insurance

On the other hand, there are some drawbacks to level cover, compared to other types of life policy.

  • The death benefit is a fixed sum, so it does not increase with inflation. In terms of purchasing power, it's worth more at the start of the policy than at the end
  • Because of inflation, you need to think about the amount of money your loved ones will need if you pass away at the end of the policy, compared to what they need now
  • It's worth remembering that your life cover policy has no cash value. If you don't pass away during the set period, your policy expires and you don't get your monthly payments back

How much does level term life insurance cost?

The price you pay in monthly premiums can vary due to a number of factors, including:

  • How much cover - You don't want to leave your loved ones without enough financial support if you passed away
  • Age - The older you are, the more expensive it is to insure your life
  • Medical history - If you have pre-existing conditions, you'll pay a higher premium

It's always worth comparing quotes from several insurance companies when buying life insurance policies.

Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.

Founder and Editor

As the founder and editor of myTribe Insurance, the role of Chris Steele is to ensure that the information we provide is of the highest quality and value to those who read it.

Frequently Asked Questions

Do I need level term life insurance for my mortgage?

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  • 34% of people with a mortgage have no life insurance in place - Source

There's no legal requirement to get life cover if you have a mortgage, but it's highly recommended. Think about your loved ones and what would happen if you pass away. How would they pay the mortgage on your home without your salary coming in?

A level term policy is a great investment, as is decreasing cover, which is more affordable and takes into account how a repayment mortgage decreases over time.

Can I alter or cancel my level term life insurance?

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You can cancel your life insurance policy at any time. If you want to alter any aspect of your policy, such as the fixed amount payout or the length of the policy, simply call your insurer and they'll do their best to make it happen.

Don't ever stop paying your premiums or you could risk losing your cover.