Level Term Life Insurance: Meaning, Benefits & Tips

Having a family or someone who is dependent on you means a long-term, emotional and financial responsibility. You want the best for them with or without you. The mere thought of death isn’t pleasant, but knowing that your loved ones  will be protected from any financial burden and their lifestyle will be taken care of brings unmeasurable relief. That is where level term life insurance comes into play. It serves as the essential protective layer that provides financial security for those you love. In this blog, we will cover everything you need to know about level term life insurance so that your family can be free of any financial worries, whether you are the policyholder or not.

What Is  Level Term Life Insurance?

Level Term Life Insurance is a type of life insurance that provides coverage for a specific period, or "term” at fixed or ‘leveled’ premium. You pay a pre-decided fixed amount of premium throughout your policy period. This factor eliminates any disturbance to your budget and makes managing regular finances, debts, and mortgages easier. In case of your unexpected demise, the beneficiary or nominee, such as your family member, receives the pre-decided life cover in the form of a death benefit.

Let’s understand with an example: 

Shekhar is a 35-year-old family man with four members. His kids are quite young and the wife is financially dependent on him. While Shekhar tries his best to give his family the comfortable life they deserve, their financial situation after his passing will be highly unstable. 

To ensure his family does not face any financial problems in case anything tragic were to happen to him, he buys a level term life insurance. He chooses a 20-year tenure, which has a fixed premium till the end. Now, he lives a stress-free life and easily manages to pay the fixed premiums without disturbing his monthly budget. 

In case he passes away within those 20 years, his family will receive the death benefit. This money will help the family pay for the kids’ education, cover daily expenses, and pay off  the mortgage. 

The fact that in level term life insurance the premium and the death benefit amount is pre-decided, brings a sense of security and comfort. It allows you to be flexible with your money and live a life without any tight financial bounds.

Benefits of Level Term Life Insurance

1. Fixed premiums

In Level Term Life Insurance, the premiums are decided at the time of buying the policy and do not change throughout the policy period. Factors like the length of the policy period or age do  not affect the fixed premiums at any point.

2. Flexible tenure

The Level Term Life Insurance has a tenure range of - The Level Term Life Insurance has a range of tenure from 5 years to 30 years. This flexibility helps individuals avail life cover for their family without any long-term commitment.

3. Rider benefit

The plan includes various riders, such as critical illness, terminal illness, accidental death, accidental disability, waiver of premium, and hospice benefits. By adding these riders.   

4. Health benefit

If the policyholder is in good health when buying the policy, they can easily avail of health benefits such as higher life coverage at affordable premiums. 

5. Tax Benefit

The level term life insurance offers tax benefits as per the prevailing tax laws u/s 80 and 10(10D) of the income tax act 1961.

Easy to understand- The level term life insurance is a straightforward policy, which is easy to understand for everyone. Under this plan, you have  full knowledge of the amount of premium that needs to be paid and the amount of life cover the beneficiary will receive in case of untimely death of the policyholder.

How Level Term Life Insurance Works

Step 1: Compare multiple insurance providers either online or by visiting their branch. Thoroughly check all the benefits, tenures and riders offered by the plan. 

Step 2: After comparing multiple policies, choose a plan that offers life coverage and premiums suitable to your family needs and  your current financial state. 

Step 3: Once you have chosen the right policy, you can proceed to fill out the application form and provide the required personal and bank details. You can add one or multiple beneficiaries and do not forget to add applicable riders to get higher death benefits.

Step 4: Next, the insurer will ask you to take a medical exam. This is to check your health, medications, smoking habits, job, hobbies, driving record, and family history.

Note- Be honest and provide accurate details about your health conditions to avoid any problems at the time of the claim settlement.

Step 5: Once your health is examined and you pass the required criteria, you can proceed to pay a fixed premium regularly. The frequency of payment can be decided as monthly, quarterly or yearly.

If you unfortunately pass away during the policy period, the beneficiary will receive the decided life coverage in the form of death benefit. This money can be used to support your family financial needs in your absence.

Note: If you survive the policy period, there won’t be any payout at the end. If available you can choose a return of premium policy at the time of buying, otherwise you or your family will not receive any death or survival benefit after the expiry of the policy. 

Tips for Buying Level Term Life Insurance

• Choose a level term life insurance that offers enough death benefit to support your family’s financial needs like debts, everyday expenses, education and medical bills after your passing.
• Choose the policy period that lasts until your priority expenses, life kids’ education and home loans are paid out.
• Before buying any life insurance make sure to compare different insurance providers for the highest coverage, affordable premium rates, hassle free settlement and customer reviews.
• Check for additional rider options  critical illness, accidental death, or waiver of premium and add the applicable ones to your policy to gain higher life coverage and protection.
• Be honest about your health conditions, habits & lifestyle to avoid issues with insurance claims later.
• Check if you can renew or convert the policy if needed, especially as you get older.
• Make sure your family members or the beneficiary has the knowledge of the policy and can avail the benefits when required.

Who Should Consider Level Term Life Insurance?

A level term life insurance can be a great choice for anyone who is looking for a higher life coverage at affordable  premiums, it is especially useful for those who have financial responsibilities and will need a replacement of income if something tragic were to happen to them. 

Here are some specific examples:

• Young Parents/Adults 
• People with growing families
• Older adults with a dependent spouse 
• Homeowners with a Mortgage
• Primary Income Earners
• Individuals with Co-Signed Debt 

Common Misconceptions About Level Term Life Insurance

Many people have misconceptions about level term life insurance which are absolutely false. Such false beliefs make people in need of life insurance hesitant of availing the benefits for them and their family. 

Here is the reality behind the top 5 misconceptions about level term life insurance:

1. “Level Term Life Insurance is expensive.”

Reality: It is actually one of the most affordable types of life insurance, especially if you buy it at a young age. The healthier and younger you are, the lower premiums you will have to pay and get higher death benefits.

2. “Young people don’t need life insurance.”

Reality: This misconception is absolutely wrong because young people especially should get life insurance due to the many benefits they get. Moreover, life is unpredictable and it’s risky to put your loved ones in financial difficulty when it is clearly avoidable.

3. “I will get my money back at the end of the policy period.”

Reality:You only get your money back if you choose a return of premium policy, otherwise there is no maturity or survival benefit if you survive the policy period. 

4. “All Life insurance plans are the same.”

Reality: While some policies might be the same, most policies are different in 

terms of benefits. For example a term life provides pure protection, while other plans may include savings or investment features.

5. “Claim settlements are never successful.”

Reality: If you choose a reputable insurance provider and are transparent, provide accurate information and keep your policy active, your claim will be successfully paid out without any hassle. 

A level term life insurance is a smart way to protect your family’s future. It ensures your family faces no financial obligations or burdens when you are no longer around. The life coverage replaces the lost incomes while also providing stability, peace of mind and protection to your family.

The payout can be utilised for mortgage payments, daily expenses, education costs, and moreover allowing your loved ones to maintain their lifestyle even in your absence. By properly understanding the policy, comparing different providers, and being honest about your health can help you make the right choice. So don’t wait, plan ahead and protect your loved ones today!