Here's how a level term life insurance policy generally works:
Choosing the coverage amount: When purchasing a policy, you decide on the amount of coverage you want. This is the death benefit that will be paid to your beneficiaries in the event of your death.
Selecting the term length: You also select the term length, which is the duration for which you want the policy to remain in effect. It could be 10, 20, or 30 years, depending on your needs and preferences.
Paying the premiums: You pay regular premiums to keep the policy active. The premium amount usually remains level or fixed throughout the term of the policy, hence the term "level" term insurance. The premium payments can be made monthly, quarterly, annually, or according to the schedule outlined by the insurance company.
Coverage during the term: As long as you continue to pay the premiums, the level term life insurance policy remains in effect. If you pass away within the specified term, the insurance company will pay the death benefit to your beneficiaries. The death benefit is typically a lump sum payment and is income-tax-free for the recipients.
Renewal or expiration: At the end of the term, the policy usually expires. Some policies may offer the option to renew or convert to a permanent life insurance policy, but the premiums may increase significantly if you choose to do so.
No cash value or investment component: It's important to note that level term life insurance does not accumulate cash value or include an investment component. The primary purpose of this type of policy is to provide a death benefit to protect your loved ones financially during the specified term.
Underwriting process: When applying for a level term life insurance policy, you will go through an underwriting process. This typically involves providing information about your health, lifestyle, and medical history. The insurance company will evaluate these factors to determine your insurability and set the premium rate.
It's recommended to carefully review the terms and conditions of the policy, including any riders or additional features, before purchasing level term life insurance. Get a level term life insurance quote now.