Life Insurance: What Is a Level Premium?

A level premium is a type of insurance premium that is regularly associated with term life insurance. The term level premium basically means that you are going to have the same premium payment for the entire life of the policy.

Level Premium

If your premium is set up to be paid monthly, you are going to pay the exact same amount every month for the whole policy. With this type of policy, you are only going to receive a death benefit in exchange for your premium payments. No cash value is going to accumulate with this policy as it would with a whole life or universal life policy. 

Implications

Whenever an individual uses a level premium life insurance policy, they are going to the paying more than they need to on the front end of the policy. However, this is going to level out because they will be paying less than what they need to pay towards the back end of the contract. Whenever you are purchasing this type of insurance, you will want to make sure that you get a guarantee that your payments will remain level.

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