What Is Level-Premium Insurance?

Level-premium insurance is a form of life insurance coverage that is structured to ensure that the premiums paid by the insured party remain the same for the duration of the policy. Typically associated with term life insurance plans, level-premium insurance makes it easy to budget the payments and enjoy the security of knowing the benefits will be there in the event that the covered party should die. The actual amount of that premium is established at the time the policy goes into effect, and will depend on the age of the insured party at the time the coverage is secured, the amount of death benefit desired, and the number of years that the policy will remain in effect.

As with any type of term-life coverage, level-premium insurance does not accrue any type of cash value, and only provides a death benefit if the insured party should pass away before the end date of the insurance contract. This is in contrast to whole life insurance plans that do accrue some type of cash value and may even be borrowed against or be accepted as collateral by some lenders. Determining both the amount of coverage and the length of the term for the policy is very important, especially if the purpose is to provide funds for loved ones if the insured party passes away before a certain age.

One of the chief benefits of level-premium insurance is that there is no change in the amount of the premiums during the life of the insurance contract. Not all forms of term-life insurance include this feature, with some policies beginning with higher premiums that eventually become lower over time. Securing a life plan that is truly level premium requires checking the terms and conditions in the insurance contract and making sure there are provisions that will keep the premiums at the same level for the 10 or 20 years that the policy will remain in effect.

Like most forms of term-life coverage, level-premium insurance is available at rates that are considerably lower than whole life plans. This is because the policy does not carry the same level of risk to the insurance provider. As a way to make sure that a loved one is cared for in the event of an untimely death before the end date of the insurance contract, going with a level-premium insurance plan can be practical as well as affordable for just about any budget.