So you’re looking to buy life insurance, but which type of policy is right for you, especially as a member of the military? There are several different types of term life insurance policies to choose from, but the most common type is level term. If you’re wondering, what is a level term insurance policy and what does the word “level” refer to? Read on for the answers to these questions as well as additional information on how level term differs from other term life insurance, how to determine the amount of coverage you need, and the military life insurance options available to you.
What Is Term Life Insurance?
Term life insurance was created to offer affordable protection to its policyholders for an allotted amount of time. One of the main appeals of term life insurance is that you can get more coverage for less money.
However, the coverage expires at the end of the policy's term. Another way term policies differ from whole life or permanent insurance is that they typically do not build cash value over time. Like your car insurance or homeowners insurance, you pay your premium regularly and if nothing goes wrong - i.e. you don’t die - you don’t get any monetary benefits back from the policy.
What Is a “Level” in Term Life Insurance Policies?
Unlike renewable term policies, which require a renewal and an increased premium periodically - usually every five years, level term policies offer a fixed benefit payout for a fixed “level” premium throughout the entire length of the policy term. This means that you will pay the same amount every month and your designated beneficiary will receive the same benefit amount regardless of how many years you have owned the policy, as long as it is still in force when you die.
Level term life insurance policies offer a straightforward safety net that can be customized by the length of the term, the premiums, and coverage amounts. You can alleviate the confusion, frustration, and high costs you may experience with some other kinds of life insurance policies when you buy a level term life insurance policy that offers protection and peace of mind in a simple, affordable, and reliable package.
Level Term vs. Decreasing Term Life Insurance
Death benefits in a level term life policy do not change, whereas decreasing term insurance offers a death benefit that decreases over the policy's life. The theory behind reducing the payout later in life is that the insured anticipates having reduced coverage needs. For example, you (hopefully) will owe less on your mortgage and other debts at age 50 than you would at age 30. As a result, you might choose to pay a lower premium and lower the amount your beneficiary would receive, because they wouldn’t have as much debt to pay on your behalf. It can be a tricky thing to get right and you do run the risk of leaving your loved ones with a bigger burden if you don’t.
Level Term Policies vs. Renewable Term Policies
Level term policies offer a predetermined amount of coverage for a specific amount of time that expires at a predetermined end date. Most people buy level term policies to cover long periods of time - 10 to 30 years - giving them the comfort of knowing they will have coverage for that entire time regardless of changes that may occur to their health or insurability. Renewable term life insurance policies are similar to level term policies but on a short-term scale. Renewable term policies usually only last a maximum of five years and need to be renewed to continue coverage. This renewal option lets your coverage roll past its end date with an extension without you needing to reapply. Some people like the flexibility of renewable because it offers an easy way to change your coverage as you age and your needs change. However, the premium rates will increase — sometimes dramatically — at each policy renewal.
How Much Level Term Life Insurance Protection Do I Need?
The amount of coverage you need will depend on your individual situation and goals. When it’s time to purchase life insurance, some things to consider are:
- Your dependents, such as a spouse, children, or elderly parents, who rely on your income
- Your financial goals
- Your income and cost of living, both currently and how it may change over a period of time
- Outstanding debts
- End of life expenses
- Additional financial support that could help your family, should you pass.
Military Level Term Life Insurance
If you're an active servicemember, Veteran, or military spouse, and you’re not sure about your future financial stability, AAFMAA offers affordable military level term policies that can address your needs. Our policies are designed to fill in the gaps left by SGLI and VGLI plans.
Start Your Life Insurance Journey Today With AAFMAA
AAFMAA works to understand and support your unique financial goals at every stage of life, tailoring our service to your unique situation. Get a free quote online or over the phone with one of our military life insurance experts at 877-398-2263 and learn more about your life insurance options today.