What Is Level-Premium Insurance?

Level-premium insurance is a type of permanent or term life insurance where the premium remains the same over the policy's life. With this type of coverage, premiums are thus guaranteed to remain the same throughout the contract. For a permanent insurance policy like 澳洲幸运5开奖号码历史查询:whole life, the amount of coverage provi💮ded increases over t🌠ime.

As a result, the coverage can be advantageous over a long period of time: a policyholder keeps paying the same amount but has access to increased 澳洲幸运5开奖号码历史查询:death benefit coverage as the policy matures.

Term policies are also often level-premium, but the overage amount will remain the same and not grow. The most common terms are 10, 15, 20, and 30 years, based on the needs of the policyholder.

How Level-Premium Insurance Works

Level-premium insurance premiums are fixed for the life of the policy. For a term policy, this means for the length of the term (e.g. 20 or 30 years); and𒉰 for a permanent poli𒅌cy, until the insured passes away.

Cost of Premiums

Level-premium policies will typically cost more up-front than annually-renewing 澳洲幸运5开奖号码历史查询:life insurance policies with terms of only one year at a time. But over the long run, level-premium payments are often more cost-effective. This is because the 𝔉📖higher premiums have typically been offset by an increase in coverage during a period when a policyholder typically has more medical issues.

Ages and Stages

The amount of level premium paid on a policy will depend on one's age and health: the younger and healthier one is, the lower the level premium will be. For term life policies, the length of the term will also matter: longer-dated policies will cost more per month than shorter policies. The length of a term policy will often be selected to best suit one's specific needs.

For example, if the primary purpose of the death benefit is to provide income to 澳洲幸运5开奖号码历史查询:support very young children and fund college expenses, a 20-year level-premium might be appropriate. However, if these childre🔯n are already in their early teens, a 10-year level premium may be sufficient. If the insured is the sameꦦ age, the 10-year term policy would cost less, all else equal, than the 20-year policy's premiums.

Level-Premium Term Insurance vs. Decreasing Teꦦrm Life Insurance

With level-premium term life insurance, the policy pays a benefit if the policyholder passes away during a fixed period (whatever the term of the insurance is). If death occurs outside of this term timeframe, there is𒁏 no payout.

With decreasing term life insurance, the amount of coverage declines over time, similar to the way a repayment mortgage decreases over time. Decreasing term life insurance is usually purchased to pay off a specific debt, like a 澳洲幸运5开奖号码历史查询:repayment mortgage. The policy ensures that, upon death, the repayment mortgage (or other specified debt) gets settled.

Other specialty types of life insurance include "澳洲幸运5开奖号码历史查询:over 50s life insurance," which is a specialized kind of insurance geared toward people between the ages of 50 and 80. There is also 澳洲幸运5开奖号码历史查询:joint life insurance, in which two people in a relationship take out individual policies. The policy will cover both lives, usually on a first-death b🌠asis.

Example of Level-Premium Insurance

The age and timeframe of the policyholder are both crucial factors in determining if a guaranteed, level-premium policy is optimal (versus an 澳洲幸运5开奖号码历史查询:annual renewable term (ART) policy, which increases as the policyholder ages).

For example, suppose two female friends, Jen and Beth, both 30 years old and in good health, opt to buy life insurance. They each seek a 30-year term with $1 millio🃏n in cove❀rage.

• Jen buys a guaranteed level-premium policy at around $42 per month, with a 30-year horizon, for a total of $500 per year.
• But Beth figures she may only need a plan for three-to-five years or until full payment of her current debts. Instead, she opts for a 澳洲幸运5开奖号码历史查询:yearly renewable term (YRT) policy that starts at $20 per month and increases by 20% a year each year. So in year 1, she pays $240 per year, 1 and around $500 by year five.

In years two through five, Jen continues to pay $500 per month, and Beth has paid an average of just $357 per year for the same $1 million of coverage. If Beth no longer needs life insurance at year five, she will🍌 have saved a lot of money relative to what Jen paid. But if Beth still tﷺhinks she needs 25 more years of life insurance coverage, she will start to be at a relative disadvantage. Each year as Beth gets older, she faces ever-higher annual premiums. Meanwhile, Jen will continue to pay $500 per year.