When people speak of term life insurance, chances are they are referring to level term life insurance. As the original form of life insurance, level term life insurance provides coverage for a period of time at a fixed premium. As an example, an individual may get insurance for a 20 year term with a death benefit of $250,000. In this example, the premiums amount to $25 per month, which is guaranteed to never increase for those 20 years. The “level” refers to the fixed components over the fixed time period. If the insured individual were to die in those 20 years, they would be guaranteed that benefit provided their premiums were paid.
Term life insurance policies are the most straight forward type of coverage, and because of this, a very popular one as well. Many people opt for this form of life insurance as it can provide protection for a limited amount of time (ie: the length of a mortgage) at a fraction of the price of whole life insurance.
The major difference between level term life insurance and whole life insurance, is that whole life insurance never expires and it also has a built in savings component. A popular alternative for many is to forgo this “forced savings” and invest the difference of premium they would otherwise pay for whole life. It is important to remember that although this strategy may be suited for some, it is best to speak with a financial professional about your own individual circumstances.
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