Level Term Insurance
Level term Insurance
Much more common than annual renewable term insurance is insurance where the premium is the same for a given period of years. The most common periods being 10, 15, 20, and 30 years. In this form, the premium paid each year is the same, and is the cost of each year’s annual renewable term rates averaged over the term, with a time value of money adjustment made by the insurer. Thus the longer the term the premium is level for, the higher the premium, because the older, more expensive to insure years are averaged into the premium.
Most level term insurance programs include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. This would be used if the health of the insured deteriorates significantly during the term.
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