One of the best parts of choosing a life insurance policy is that you can completely customize it to fit your needs. Luckily, when it comes to life insurance, there are plenty of options.
Two popular choices include renewable term life insurance and level rate life insurance. If you’re curious about which is the better option for you, we’ve got everything you need to know right here.
How It Works: Renewable Term Life Insurance vs. Level Rate Insurance
Renewable Term Life Insurance
Renewable term life insurance, also known as yearly renewable term life insurance and adjustable-rate insurance, is one of the most adaptable policies. Offering flexible renewal options, renewable life insurance is designed to work with your changing life, not lock you in.
Typically, renewable term insurance is on an annual basis, with the premium amounts rising each subsequent renewal.
That means your premiums will be lowest when the policy is first purchased and grow over time as you age.
Level Rate Life Insurance
On the other hand, level rate insurance offers the same rate from the point of purchase until the policy’s term is over.
Unlike the renewable policy, you can expect to pay the same premium throughout the entire time you hold a level rate policy.
Which Insurance Type Is a Better Financial Choice?
Both a renewable term and level rate insurance policy can be financially beneficial. Experts recommend opting for the renewable term policy if you only anticipate needing the policy for a short amount of time.
By holding the policy for a couple of years, you pay lower rates upfront and avoid the rising rates by getting rid of the policy early on.
However, if you are looking for a term policy to carry you through years of coverage, the level rate plan is likely to be better financially.
Rather than facing rising premiums as you age, you enjoy stable, affordable premiums across the board.
Times when a renewable life policy may make more sense than the level policy include:
- Needing coverage until children turn 18
- Needing supplemental insurance until beginning a new job
- You’re young and need temporary coverage
- Needing coverage before an upcoming life change, such as marriage
Renewable or Level Rate Insurance: Which Is Right for You?
When searching for the best term life insurance you’ll need to consider which works best with your lifestyle.
A level rate insurance policy offers a sense of peace of mind as you know exactly what to expect from start to finish. Alternatively, a renewable term policy with adjustable rates means a different payment from one year to the next – though lower in the beginning.
While the rate rises may be gradual over time, you’ll want to consider how payments will look at the start of your policy versus the end, especially if you are keeping the policy for a long time.
The different life insurance types can be confusing at first glance, but the reality is that there is something for everyone.
