Level Term Life Insurance Made Simple: A Step-by-Step Guide Kiwi’s Like

level term life insurance

Level term life insurance covers you for a specific amount of time.

Both the sum insured and the premiums stay exactly the same with a guaranteed standard level term life insurance policy.

The cost you pay won’t increase with inflation, but then neither will the sum insured – your payout.

Level term life insurance is for protection, not investment.

And the money you save, you can invest.

What is level term life insurance?

Level Term Life Insurance is a death benefit policy, where the insurer unilaterally promises to keep the cost of premiums and sum assured the same through the agreed term. A benefit is paid out upon death or if diagnosed with terminal illness.

1. Is level term life insurance a good fit for me

The simple answer for most people is: yes.

Level term life insurance in New Zealand is getting more and more popular – and there are good reasons for that.

Dollar for dollar, level term life insurance provides the best value for money.

The Cost Difference?

Renewable life insurance premiums have no expiry date or maximum term.

But can cost 3 to 15 times more than the same coverage amount in level term life insurance, over the lifetime of the policy.

2. Level Term Life Insurance vs Stepped/Annual Renewable Premiums

Level term life insurance is a unilateral life insurance policy.

Meaning, the insurer makes an enforceable promise not to increase the cost of premiums.

This is also sometimes called guaranteed level term life insurance.

Please be aware, there are some life insurance companies in New Zealand that offer a look-alike level term life insurance, but without the promise or guarantee not to increase the cost of premiums.

At LifeCovered, we only compare guaranteed level term life insurance.

Anything else is a waste.

a) Comparison: Premiums & Sum Insured are Not Inflation Adjusted

Who could benefit from a non-inflation adjusted level term policy?

Perhaps homeowners with a mortgage, or someone that wants a cover but doesn’t want the premiums to increase all the time.

Ironically many Banks offer only stepped life insurance.

The graphs speak for itself.

no-Inflation-premiums-sum-insured-comparison

b) Comparison: Premiums & Sum Insured Are Inflation Adjusted

What is noticeable here is that the Stepped Premiums increase much more with inflation – indexation factor activated.

Level Term Life Insurance increases as well, but not nearly as much.

Comparing premiums, the Sum Insured increase equally in line with the indexation factor.

Sum Insured end results is the same for Stepped or Level.

The only difference is how much you want to pay?

Inflation-adjusted-premiums-sum-insured-comparison

3. Increasing level term life insurance

Increasing term life insurance is designed to combat inflation.

All the same insurers of guaranteed term life insurance offer a variation to the term life insurance policy.

It allows the payout to increase over time. Sum insured and the cost of premiums increase with inflation.

For example, if you have children or if your income increases, a greater payout will be required to provide a suitable level of protection for your dependents.

4. Which Insurers offer Guaranteed Term Level Life Insurance in New Zealand

wdt_ID Company Maximum Cover Maximum Age For New Cover Maximum Term
19 Asteron Unlimited 65 years 80 years of age
20 Sovereign Unlimited - 80 years of age
21 Fidelity Life Unlimited 75 years 100 years of age
22 AIA Max $16,000,000 69 years 100 years of age

5. Why consider level term life insurance

What sets level term life insurance apart is that premiums and coverage stay the same for a term.

If you have a mortgage, most mortgage lenders may want to see you have life insurance in place to cover the debt.

Alternatively, it could also be used to help pay off debts, cover funeral costs or to support your family if you were to die unexpectedly.

Compare level term life insurance quotes

How would you like a life insurance policy that guarantees premiums do not increase for the next 10, 20 or 30 years?

If you don’t smoke and your weight is pretty normal, based on your height and gender, chances are you qualify for preferred rates.

We don’t promote one company or one policy. That’s your choice.

But we represent the top-rated companies with the best life insurance in New Zealand that:

wdt_ID Company Credit Rating Approval Time Cover Amount Monthly Premiums*
19 Asteron A+ (Very Strong)
Standard & Poor's
0-30 Days $250,000 $73.94
20 Sovereign A+ (Superior)
A. M. Best
7-30 Days $250,000 $79.88
21 Fidelity Life A- (Excellent)
A.M. Best
0-30 Days $250,000 $81.31
22 AIA AA- (Very Strong)
Standard & Poor's
7-30 Days $250,000 $88.01

*Prices are an estimate based on a 40-year-old non-smoking male office worker, insuring for 250,000 and premiums are fixed until 80 years of age. Quotes last checked 12 November 2018 and are subject to change. 

6. People Also Ask

What if I die before my term policy ends?

If you die during the term, a tax-free death benefit is paid out to the policy owner or beneficiary. If you don’t die during the term, most policies automatically convert to a yearly renewable policy.

When does level term life insurance end?

Level term life insurance is a life insurance policy that lasts for a specific period of time, ie a term. Once you have a level term life insurance policy in place, the policy will only end after the term period has elapsed.