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Level Term Life Insurance

TeamAckoMay 13, 2024

In terms of death benefits, Term Insurance can be considered as the purest type of life insurance. It can be further subdivided to better meet the individual buyer's needs, and Level Term Insurance is one such plan. It functions similarly to Term Insurance, but is commonly known as a level benefit policy because the policy's death benefit is guaranteed to be a set amount. Read ahead to understand more about this type of coverage.




What is a Level Term Insurance policy?

Level Term Insurance is a type of Term Insurance policy where if the insured person were to pass away unexpectedly during the policy's effective period, the beneficiary would receive the death benefit. In a Level Premium Term Plan premiums remain constant for the duration of the policy. Here, the premium and the death benefit are guaranteed never to change. Depending on the policyholder's needs, the duration of a Level Term Insurance coverage ranges from ten to thirty years.

Types of Level Term Insurance

The following are some of the most common policy duration options available with Level Term Insurance plans.

Five-Year Level Term Policy

This policy provides level coverage for five years. Someone who plans to retire within the next five years can take advantage of this plan.

10-Year Level Term Insurance Policy

People who desire to be covered for a decade can benefit from this type of basic term insurance. Parents with growing children who want to set aside money for their kids' futures, such as college expenses, often choose this plan.

15-Year Level Term Insurance Policy

The price for a plan that guarantees coverage for 15 years could be quite costly. Those looking to achieve their long-term financial goals may consider enrolling in one of these programs.

Besides the variations mentioned above, Level Term Insurance policies can be purchased in terms of 20, 30, or even fewer than five years depending upon the insurer.

Features of Level Term Policy

Here are some prominent features of Level Term Policy. 

How does a Level Term Insurance work?

In contrast to other types of term insurance, the premium for Level Term Plans remains constant throughout the policy. Factors, including age, annual income, medical health, and other requirements and liabilities, are considered when insurance companies determine premiums.A Level Term Insurance Plan functions similarly to any other insurance policy. The following guidelines should guide you through the process.

  • Set the policy's Sum Assured, term, and how the death benefit will be paid.

  • Monthly, quarterly, semi-annual or annual subscription payments are accepted.

  • If you pass away unexpectedly, your loved ones will receive a death benefit through a lump sum or periodic payments.

  • When you first purchase your policy, you must select the Return on the Premium option to ensure the insurer will make any payments if you live over the policy's maturity date.

Consider Aryan, who, for example, purchased a Rs. 20 Lakhs Sum Assured Level Term Insurance Policy. He decides on a 30-year coverage and pays the monthly premiums that go along with it. Given this, Aryan's mother, as the primary beneficiary, must inform the insurance company in case of her son's untimely demise and file a claim. The insurance company must pay Rs. 20 Lakhs to Aryan's mother after the claim has been verified.

Benefits of Level Term Insurance

The following guidelines elaborate on the many advantages of this policy.

  • Financial security guaranteed

Your loved ones can use the death benefit from your Level Term Insurance Policy to meet their financial obligations. They can use the money to pay off your debts and continue with their lives without worrying about how they will make ends meet.

  • Reasonably priced and simple to understand

Buying Term Insurance won't break the bank or strain a person's financial resources. Purchasing the best Term Plan is now a simple process that can be done online after carefully considering one's needs.

  • Premium rate stability

The policy's monthly payment will remain the same. Your premium from the life insurance provider cannot be increased while the policy is in effect. The insurance company must cover you for the agreed-upon sum until the policy expires, even if you experience a significant decline in health. Level Term Insurance policyholders may be eligible for tax breaks under sections 80C and 10(100) of the Income Tax Act, 1961. The beneficiaries do not have to pay taxes on the death benefit.

Drawbacks of Level Term Insurance

The disadvantages of purchasing level-term insurance can be substantial. 

  • To begin with, you will only receive payments from the policy if you outlast its term. 

  • Second, you'll have aged by the time your policy expires, which raises the odds that you'll develop some medical problem. As a result, your health risks will increase the premiums for any policy you purchase in the future.

What are the reasons to choose a Level Term Insurance policy?

Here are the top reasons to choose a Level Term Insurance policy. 

  • A Level Term Insurance Policy provides your loved ones with a lump sum payment that can be used for any purpose, such as living expenses, continuing education, debts, and more. 

  • In addition, riders like Critical Illness Coverage can be added to your plan anytime, allowing you to protect your loved ones further. 

  • Unlike other types of insurance, the premiums for a Level Term Plan won't go through the roof while still providing financial security for your loved ones. You can rest easy knowing that your loved ones will be safeguarded without worrying about any hidden fees.

Steps To Getting a Level Term Policy

The process can be daunting when considering getting a level-term life insurance policy. However, breaking it down into manageable steps can make it much easier to understand and navigate. Here’s a detailed guide to help you through each stage:

1. Determining Coverage Needs

The first step in obtaining a level-term policy is determining how much coverage you need. This amount should cover your major financial responsibilities and obligations. For instance, consider debts like mortgages, car loans, or personal loans, future educational expenses for your children, and ongoing living expenses for your dependents. A common approach is choosing a coverage amount of 10 to 12 times your annual income. This calculation helps ensure that in the event of your untimely demise, your family can maintain their current lifestyle without financial strain.

2. Obtaining Quotes and Assessing Costs

Once you know how much coverage you need, the next step is to gather quotes from various insurance providers. This can be done online through insurance comparison tools or consulting directly with insurance agents or brokers. It's important to compare not only the premiums but also the terms and conditions of the policies. Be mindful of any additional features or riders that can be included to enhance your coverage. Assessing costs effectively means balancing affordability with the comprehensiveness of coverage.

3. Application Submission and Health Assessment

You must complete an application form after selecting a provider and a policy that suits your needs. This form will require detailed information about your health history, lifestyle, and risky habits (like smoking or extreme sports) that could affect your risk profile. Most insurance companies require a medical examination to verify your health details post-application. This health assessment might include blood tests, a physical exam, and other diagnostic procedures. These are crucial as they influence your final premium; higher risk factors generally lead to higher premiums.

4. Approval, Premium Payment, and Beneficiary Designation

Following your application and health assessment, the insurance company will review and either approve or decline your policy application. You’ll be notified about the premium amounts and payment schedules if approved. Your next step would be to make your first premium payment to activate the policy. Additionally, this stage involves designating beneficiaries, which means officially naming the person or people who will receive the policy's benefit in the event of your death. It’s essential to clearly specify this to avoid any confusion or legal issues later on.

By carefully following these steps, you ensure that you select a level-term policy that meets your needs and provides peace of mind, knowing your loved ones will be financially secure in your absence.

Factors to Consider When Choosing Level Term Life Insurance

Choosing the right level term life insurance policy involves weighing various factors to ensure that the policy you select aligns well with your needs and financial goals. Here are these factors to consider:

1. Length of Coverage

Determine how long you need the coverage. Common terms are 10, 20, or 30 years. Consider significant milestones such as your children's age, your retirement age, and the duration of your considerable financial obligations.

2. Amount of Coverage

Calculate the total amount of coverage you need based on future financial obligations, including debts, living expenses for dependents, and future educational costs. This ensures your family’s financial stability in your absence.

3. Cost of Premiums

Compare the cost of premiums from different insurers. While it’s tempting to go for the cheapest option, ensure it provides adequate coverage without compromising essential features.

Fixed Premiums: Since premiums in level-term policies generally remain the same throughout the term, ensure the premiums are affordable now and will remain manageable.

4. Insurance Company’s Reputation and Financial Stability

Research the insurer's reputation for customer service and claims payment. A company with a good track record is crucial.

5. Financial Health

Check ratings from independent agencies like A.M. Best or Standard & Poor’s, which assess insurance companies' financial strength and claims-paying ability.

6. Policy Features and Flexibility

Some policies offer the option to convert your term policy to a whole life policy without additional medical exams, which can be valuable if your health changes.

7. Riders and Benefits

Look for possible additions like accidental death, critical illness riders, permanent disability, or premium waivers, which cover your premiums in case of disability.

8. Ease of Application Process

Consider how easy it is to apply for the policy. Some insurers have streamlined the application process with fewer medical requirements or even no-exam policies for those who qualify.

9. Clarity and Transparency

Ensure you fully understand what the policy covers and what it excludes. The terms and conditions should be clear and transparent to avoid surprises during a claim.

Considering these factors, you can choose a level-term life insurance policy that meets your current financial situation and effectively provides for your family's future needs.

Who might benefit from purchasing Level Term Insurance?

Level Term Insurance could be useful for somebody who is a financial supporter of others. Before investing in a costly and potentially risky Permanent Life Insurance Policy, policy-seekers might examine affordable and flexible term options.Parents with young children or those planning to start a family may consider purchasing Level Term Life Insurance. They might get enough insurance to cover future child care expenses, college tuition, and living expenses and replace lost income during their kids' formative years.

Tips for choosing the right Level Term Insurance plan

Follow these tips to get an apt Level Term Insurance plan. 

  • Find a reasonable Level Term Life Insurance Policy that meets your needs. 

  • Your insurance policy could lapse if you cannot pay the required premium installments. Thus, consider your financial situation before buying it. 

  • Pick a term that includes your highest expected financial outlay years. For instance, a 20-year term life insurance policy may appeal to young parents who expect their children to have graduated from college and be living on their own by the time the policy matures. 

  • Finally, think about the insurer's track record with customers, policy details, and dependability.

What happens when a Level Term Insurance policy expires?

Coverage under a Level Term Life Insurance policy may end when the term ends or be extended at a more expensive premium. When you renew your coverage, you won't have to undergo another physical and health questionnaire to determine your mortality risk.

At the end of the term, you can change your coverage to a permanent one. There would still be a premium increase, but as long as you continued making payments, your policy wouldn't expire.

The insurance company may restore the premiums paid after the initial term if the policyholder lives longer than the policy's term and the rider providing for such a return of premium was purchased.

The cost of Level Term Life Insurance can rise if you add a Return of Premium rider.Unless the policyholder renews or converts their policy, their beneficiaries will not get a death benefit if they outlast the initial term for Level Term Life Insurance.

Term Insurance from ACKO

If you are looking for a term insurance plan to protect your family, explore ACKO Life Flexi Term Plan. This Pure, Non-Linked term insurance plan offers all-inclusive coverage for you and a financial safety net for your loved ones. 

With this plan, you can customise your sum assured and policy term based on your evolving financial needs. You can also add valuable add-ons such as ACKO Life Accidental Death Benefit Rider, ACKO Life Accidental Total Permanent Disability Benefit Rider, or ACKO Life Critical Illness Benefit Rider and personalise your plan. 

Find the right plan--->

Frequently Asked Questions (FAQs)

Here’s a list of common questions and answers related to Level Term Insurance.


Will the premium change in the years to come?

No, the premium remains the same throughout the policy term in a Level Term Insurance Plan.

What happens if the insured smokes a few years after insuring himself with a life insurance policy?

If the insured smokes a few years after insuring himself, it may affect the premium of the Term Insurance Plan, as personal habits like smoking can increase the risk of health issues, which can lead to a higher premium. However, the exact impact on the premium may vary depending on the insurance company and the policy. 

Is a medical examination required to avail of a Level Term Insurance Policy in India?

Whether a medical examination is required to avail of a Level Term Insurance Policy in India depends on various factors such as the sum insured and the age of the applicant.

What if I want to cancel my Level Term Insurance policy prematurely?

Suppose you decide to cancel your level-term insurance policy before it expires. In that case, you may not receive any refund on the premiums paid unless you have a “return of premium” policy. Understanding the cancellation terms outlined in your policy agreement is crucial to be aware of any potential penalties or losses. 

How does inflation affect Level Term Insurance?

Inflation can erode the value of the fixed death benefit over time. Consider how much the money will be worth considering a level-term insurance policy. If inflation is a concern, consider a policy with a built-in increase to the sum assured or look for financial products that provide inflation protection.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.


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