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Level term

Level term life assurance is seen as a ‘safe’ option. When you take out the policy you agree a term length with the insurance provider, as well as an amount you wish to have paid to your estate in the event that you die during the agreed term. In a sense it is a type of insurance you never want a payout from, but it also an extremely useful and simple way of providing your family with future financial security.

Level term life assurance is the cheapest method to ensure a life. The premiums - the money you pay each month - remain the same throughout; hence the name of the insurance, however if you don’t die during the term you will not get any payout and there is no cash in value.

This type of contract only provides cover upon death and there is no surrender value (you won't get any money back if you cancel at any time). If you stop paying your monthly premiums your cover stops immediately.

Premiums are based on your personal circumstances, but the main areas for consideration by an insurer are your age and state of health. The older you are and the worse your state of health is deemed to be, the more you will have to pay in monthly premiums. Similarly if you have, or have had, a serious illness the insurer may charge you more or in some cases be unwilling to cover you at all. And the higher the level of cover you want and longer you need it, the more it will cost you.

Currently the premiums on these plans are also partially derived by gender; however from December 2012 the EU Gender Directive will see companies banned from using gender as a defining factor in working out insurance premiums. At the moment males are paying higher premiums for exactly the same insurance as females, as the latter have a longer life expectancy. It is thought that the EU Gender Directive will see insurance companies raise their premiums for females, instead of lowering male premiums. So, if you are a female looking to take out life insurance it would be wise to do so before the end of 2012.

The only real disadvantage to this type of insurance is that it is inflexible. You are not able to change either the premiums or the payout sum over the length of the term, which you also cannot change. It must also be noted that this is not an investment product, and subsequently does not take into account inflation rates.

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