Level Term Life Insurance

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What is level term life insurance?

Level term life insurance is where the insurer pays out a fixed lump sum if the policy holder dies within the term agreed.

This type of cover offers security that your beneficiaries can receive a specific sum, which can help you all plan for a time when you're no longer around.

There are any number of reasons you might want to cover a specific amount of money - debts, interest-only mortgages, continuation of life as your loved ones know it or simply as a gift to the next generation.

What are the benefits of a level term policy?

There are a number of reasons you might choose level term life cover over decreasing or increasing term policies.

This is primarily designed to provide peace of mind. Whether that’s because you can be confident in the knowledge that you have provided for your loved ones after death or you want to contribute to their financial security after you are no longer, it may make everything feel that little bit more secure.

If you have a large estate and you know that your loved ones can expect a sizeable bill, then you might want to consider level life cover as a way for them to meet this obligation without reaching into their personal coffers.

People also take out level term insurance to prevent disruption to their loved ones’ lives should the policy holder die. For example, if you have a child who has recently enrolled in a fee-paying school, a level cover policy may ensure that they can remain in their preferred environment if you were no longer around.

In this particular example, level term cover may be more appropriate than increasing term cover because the period of time your child is in school won’t be significantly impacted by the effects of inflation.

However, if you want your policy to last a long period of time, then taking inflation into account with an increasing term policy might be a sensible option.

If you have personal debts, you might want to consider decreasing term life insurance, as this is more specifically designed to repay ongoing financial commitments. However, your beneficiaries can use your level term pay-out to clear outstanding debts if you have them. If your policy remains valid and your premiums are always met, then you can choose to leave as much as £750,000 to your loved ones for when you pass.

Is level life insurance right for me?

When choosing life insurance, the most important consideration is what you want a life insurance pay-out to contribute towards. If you have an interest only mortgage, then the pay-out from a level term policy can assist those you leave behind with the mortgage payment.

If you want to simply leave a legacy for loved ones, then level and increasing term policies might be other choices available to you.

Post Office Level Term Life Insurance

What's it for? Providing for your loved ones and/or paying off an interest-only mortgage if you die
Fixed cash sum pay-out?
What's the maximum pay-out? Up to £750,000 ** (depending on age)
Age limit Ages 18-70
Is terminal illness cover included?
Are health-related question asked?
Can I add Critical Illness Cover and children's cover to my policy?
  • (additional cost will be applicable)
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What are the disadvantages of a level policy?

A level cover policy offers a fixed sum which does not adjust for inflation. This means that its value when it is paid may be less than its value when it was purchased.

If you think of the value of the property market as an example, £500,000 was worth considerably more a decade ago than it is today. If the policy covers a short period of time, then the difference will be minor. However, life insurance policies are typically designed for longer periods of time, and so the total value of coverage might be worth less in 30 or 40 years in comparison to the same amount today.

It is important to note that pay-outs from level term life cover may be eligible for inheritance tax, and this is something that needs to be considered when deciding how much cover you need.

Getting life insurance is a great way to ensure you don’t leave loved ones with unmanageable expenses. Discover more options today

What are the advantages of decreasing and increasing cover?

Decreasing Life Insurance

A guide to Decreasing Life Insurance

If you have a repayment mortgage, then decreasing life insurance might be more appropriate for you. It maintains the same value as your mortgage while you pay it off. Therefore, your payout will decrease in value as your mortgage becomes smaller, offering you peace of mind that should you die while repaying your provider, your outstanding debt won’t fall to your loved ones.

The cap on mortgage interest rates that insurers cover can differ between providers, so always ensure that this cap is in line with your mortgage. If your mortgage interest rate is 8% or less, then a Post Office Decreasing Life Insurance policy may be right for you.

Increasing Life Insurance

A guide to Increasing Life Insurance

Unlike level cover, increasing cover takes the rising cost of living (inflation)into account, meaning the payout value increases over time. As your cover increases, so do your premium payments. This can also mean that premiums are often higher than those of level and decreasing cover (for the same individual).

If you would like a policy that adjusts for inflation, allowing your payout to retain its same real-terms value, then you might want to consider increasing term cover.

Important considerations

With some insurers, level and increasing cover policies can be put into trust, which means that in certain circumstances they no longer constitute a part of your estate. The proceeds from the policy can be paid directly to the beneficiaries rather than your estate and will therefore not be taken into account when inheritance tax is calculated. Estate and tax planning can be complicated, it is therefore important to seek advice from an independent financial advisor or solicitor to discuss your particular circumstances.

Ways to get covered

Post Office Life Insurance

Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.

Find out more

Post Office Over 50s Life Insurance

If you're aged between 50 and 80 Post Office could help you to leave your family the gift of a cash sum or help towards your funeral costs

Find out more


Optional extras with your Post Office Life Insurance

Post Office Children's Cover

Get extra cover for your little ones and financial peace of mind that your children are covered, by adding the optional children's cover to your Post Office Life Insurance.

Find out more

Post Office Critical Illness Cover

Get extra protection and financial peace of mind by adding the optional critical illness cover to your Post Office Life Insurance.

Find out more

Still have questions?

You can find more life insurance articles at Post Office My Family.

Things you need to know

** Your cash sum is dependent on your age, smoker status, length and type of cover and your personal circumstances at the time you apply.

Post Office Life Insurance offers up to £750,000 cover, depending on your age, for customers who are UK residents aged 18-70 at the start of the policy. The minimum term is 5 years and cover must end before your 90th birthday.

We won’t pay a claim on death if it was as a result of suicide or intentional self-inflicted injury within 12 months of the start date of your policy.

Critical Illness Cover can pay an extra cash sum if you are diagnosed, during the term of your policy, with one of the four critical illnesses covered that meets our definition.

We won’t pay a claim on terminal illness if you don’t meet our definition of terminal illness; or terminal illness is caused by intentional self-inflicted injury within 12 months of the start date of your policy. The full definition of terminal illness can be found in the Terms and Conditions.

We won’t pay a claim if you don’t keep your payments up to date as you will no longer be covered under the policy. If you don’t tell us something or give us incorrect answers to our application questions that affects your cover, we may reduce the amount we pay for a claim or at worst cancel your cover and not refund your monthly payments. If you’re a UK resident aged between 18 and 70, you can apply for cover. Please see Terms and Conditions for further details about the restrictions that apply.  

Post Office Life Insurance is underwritten and administered by Scottish Friendly Assurance Society Limited. Neilson Financial Services Limited assist in the administration. If you buy Post Office Life Insurance over the telephone, it is arranged and sold by Post Office Limited and Post Office Management Services Limited. If you buy Post Office Life Insurance online, it is arranged and sold by Neilson Financial Services Limited, following an introduction by Post Office Limited.

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