There are as many flavors and kinds of life insurance as there are flavors of ice cream. We concentrate on level term life insurance because it fits the definition of what works to address the risk for which we need life insurance in the first place. Let's look at the benefits and structure of level term life insurance.
First, what does "level" mean when discussing life insurance and what's the alternative. In a nutshell, level means that the life insurance policy has a fixed premium amount that you pay for a fixed amount of life coverage during a fixed period of time. You'll notice the repeated use of "fixed" in that sentence. When people new to comparing life insurance enter the market, level term life is usually what comes to mind. In our view, this is the most affordable vehicle to address the common life insurance needs that most people face. Before we go into why, what are the alternatives?
First, there are various modifications of term life that are not level. For example, there is decreasing term life insurance. With this variation, we replace one or more of the "fixed" with decreasing. For example, the amount of term life insurance premium might decrease during the length of coverage. The theory is that you need less coverage as you get closer to the end of a given term. For example, if you have a new family or mortgage, this assumption is that having the face value of protection is more important during the first say 10 years than the last 10. This might resonate in the case of a mortgage since mortgages flip as you go forward from paying interest to paying equity. The trade-off for this loss of coverage in the out-years is a lower premium. The problem is that it's
not enough savings to justify the loss of coverage since level term life insurance has become so in-expensive. Think about it. The probability of a person applying for coverage at age 30 and passing away during the next 20 years of their life is very low. It's a real risk which we discuss in our life insurance risk article, but the probability is low. Is there really that big of a difference in the already low probability between age 30 and age 40? Probably not. Both are equally low and so the premium savings is slight and in our opinion, not enough to justify the loss of coverage.
The other issue is that you're assuming that (in the case of the example above), the financial responsibilities are significantly less at age 45-50. Ask a 50 years old if that seems to be true. If anything, in the case of a young family, college is usually hitting around that time and the cost of college is projected to be 100's of thousands per child. That's not exactly the time to skimp on term life protection for a few dollars of savings. It defeats the purpose of having life insurance to begin with.
Of course, level term life differs completely from whole life insurance, where you usually start with a small guaranteed amount and slowly (very slowly) build a cash value in the policy for a lot more premium. We have explained in our why term life article why we prefer level term life as an affordable way to insure against the underlying risk. Knowing you are protected for a guaranteed amount of coverage and with a guaranteed premium amount is the right way to do it and will allow you to sleep better at night. Level term life insurance accomplishes all above.