Level death benefit is a life insurance policy option which fixes the death benefit at a specific amount for the duration of the life insurance plan. For instance, if you purchase a 30-year life insurance plan, your death benefit will stay the same throughout the 30-year period. With level death benefit, the time a person dies has no effect on the life insurance policy. Just as long as you pay your premiums, your coverage will never expire.
Pros of level death benefit
- It is affordable
You pay less in premiums for a level death benefit when compared to other life insurance policy options. Even though the premiums might be expensive in the beginning, it becomes cost effective the longer you keep the plan.
- It can be used as a savings vehicle
You can use your level death benefit policy to save towards a dream project of your choice. This is possible because the level death benefit policy premiums are fixed at the same amount for the duration of the life insurance policy.
Cons of level death benefit
- It only pays out the value of your life insurance policy
In the event of your death, your family will only receive the amount at which your life insurance policy is valued. So, if your life insurance policy is valued at $30,000, that would be the amount that would be paid to your dependents.
- It is affected by inflation
Inflation and market rates can positively or adversely affect the value of the level death benefit. For instance, in periods of inflation, the real value of the level death benefit may be severely reduced.
Who is eligible for a level death benefit?
- Parents who want to buy life insurance for their kids
If you want to buy life insurance for your young children, you should consider level death benefit. Since the premiums are kept at a very low amount, it will remain that way for the rest of their lives.
- People with long term needs
If you plan on replacing your income in the future, going to college or maybe planning your estate, you should consider getting level death benefit. It will help you stay within your budget.