A term plan is an affordable kind of life insurance that provides financial protection to family members in the absence of a policyholder. A level term plan is one of the Types of Term Insurance under which death benefits are paid to the family members of the policyholder to meet the financial obligation in their absence. This death benefit can be used by family members to meet routine expenses, outstanding loan repayments, education fees, etc. It also provides huge coverage because of additional riders which can be availed. Under this plan, no features can be altered during the policy tenure.
This plan is also known as the Level Premium term plan, where a policyholder pays a fixed amount of premium during its policy tenure. Hence, the premium amount and the death benefits remain constant. Let us now discuss the different types of Level term insurance plans.
Types of Level-Term Insurance Plans
Provided are the different types of Level-Term Insurance Plans:
- Level Term Life Insurance for 5 Years
This level of term insurance has 5 years of policy tenure. This plan is suitable for those individuals who are looking for a short-term plan. Let us suppose a person whose retirement is approaching in the next 5 years or a person who has just completed his graduation or started a job can take up this plan.
- Level Term Life Insurance for 10 Years
This level of term insurance has 10 years of policy tenure. This plan suits those individuals who are looking for coverage for a decade. Let us suppose parents whose children are growing up and over a decade would require funds for their children’s higher education.
- Level Term Life Insurance for 15 Years
This level of term insurance has 15 years of policy tenure. This plan suits those individuals who are looking for long-term coverage. This plan can be used to meet long-term objectives.
Features of Level Term Insurance Plan
Proved below are the features of the Level Term Insurance plan:
- Fixed Premium
Under this plan, the premium amount remains constant, i.e., it cannot be altered throughout its policy tenure. This means the premium amount is fixed irrespective of the length of the policy or the age of the policyholder.
- Level Death Benefit
The death benefit amount also remains constant throughout its policy tenure, just like the fixed premium amount.
- Term Duration Options
Unlike fixed premiums or death benefits, the duration of the policy can be changed. These plans offer the policy tenure in a variety of options, such as 10, 20, or 30 years.
How Does Level Term Plan Work?
Below are the steps to be followed:
- Decide the amount of coverage and the policy tenure.
- Fill out the application form along with a questionnaire, which will include health-related history, financial information, etc.
- Undergo medical examinations.
- Get approvals on the same.
Benefits of Level Term Insurance Plan
Before we Buy Term Insurance, let us know its benefits:
- Affordable Premiums
Level-term plans are considered to be the most affordable plans, as they provide huge coverage at budget-friendly costs.
- Flexible Tenure
Level Term Plans offers a multiple range of policy tenure plans from which to choose. One can choose a plan starting from 5 5-year plan to 15 years of plan till you attain 100 years of age.
- Rider Benefits
This plan also facilitates the addition of rider benefits, i.e. one can add additional riders to the base plan. Examples of these riders are critical illnesses, accidental death, critical illnesses, premium waiver, disabilities due to an accident, and hospital benefits.
- Stability
This plan provides a great level of stability. This is due to the fact that the coverage will remain the same, keeping the policyholders stress-free while making fixed premium payments over the tenure.
- Health Benefits
One can also benefit from this plan when buying a long-term plan. For instance, if an individual is in good health, he can get health benefits with this plan, such as high coverage at a reasonable amount of premiums,
- Tax Benefits
This plan also provides tax advantages under section 80C and section 10(10D) of the Income Tax Act, 1961.
- Easy to Understand
This plan is quite easy to understand as the policyholder would be well aware of the amount which his/ her beneficiaries will get if he/ she doesn’t survive.
- Effortless Budgeting
This plan is quite affordable and, hence, can be planned along with the livelihood expenses. Also, the policyholder can budget well in advance by fixing the maturity amount mutually between the insurer and the insured.
Whole Life Insurance, Decreasing Term insurance, and Level term Insurance: A Comparison
| Basis | Whole Life Insurance | Decreasing Term insurance | Level term Insurance |
| Death Benefit | It comes with a guaranteed death benefit and remains alive for the entire life of the insured. | The benefits of death keep decreasing with the passage of time. | Death benefits remain constant throughout the complete policy tenure. |
| Premium Type | Increasing premium for the complete policy | Decreasing the premium for the complete policy | Fixed amount of premium |
| Duration | Complete Life, i.e. 99-100 years | 1 – 30 years | 5 – 40 Years |
| Cost | Slight Costly | Cost-Effective | Cost-Effective |
| Tax Benefit | Includes tax benefit | Includes tax benefit | Includes tax benefit |
Conclusion
A level-term plan is a cost-effective and most preferable type of life insurance plan, where a policyholder can choose the policy tenure according to the requirements and financial objectives. Still, it is advisable to opt for a plan with longer tenure to get maximum coverage. The main difference between a level term plan and other plans is that a policyholder needs not to bother about increasing the premium amount or decreasing the sum assured amount. By buying a level-term plan, one can remove the hassles of altering one’s budget or swapping one future financial considerations.
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