Level-Term Life Insurance

You pay a monthly premium to a life insurer in return for the assurance that they will pay out an agreed sum if you die within a set period of time. If you do not die within this period, the policy then expires.

You choose the payout, also know as the sum-assured, how long you'd like to be covered for as well as any additional benefits, such as critical illness cover, that you'd like to include. Monthly premium payments must be upheld to ensure the policy remains valid.

Level term Life Insurance is a sensible way of planning ahead for the future, especially if you're depended on financially by others. The payout can help alleviate any financial burdens that you or your family may have, and could be used:

• to pay for funeral costs.
• to pay off a repayment mortgage.
• to pay off any outstanding debts.
• to help with everyday living fees such a utility and educational fees.
• to help maintain a standard of living for your partner or children.

Life Insurance premiums will vary depending on the amount and duration of cover you've chosen. Your age, health, lifestyle and whether or not you smoke will also play a part.

When calculating the price of your life insurance quote, insurers will weigh up how likely it is they will need to pay out, in line with how much they will have to pay your family. As a general rule, the longer the period of cover and the larger the payout, the more expensive the premium.

When taking out a policy, it is important to ensure that your monthly premium is affordable in the long term as failure to pay your premiums will invalidate your cover. Cancelling and taking out a new policy at a later date could mean that your premiums will be considerably higher due to your difference in age.

The cost of life insurance can also vary depending on if you choose a fixed or reviewable premium. Fixed premiums stay the same price throughout the policy term, whereas reviewable premiums can, with your approval, change at 5-yearly intervals. Fixed premiums offer the security that premiums will not change and so are usually more expensive than reviewable premiums to begin with.

You decide how much you want your cover or 'sum-assured' to be. This is the amount your family will receive in the event of your death.When choosing how much cover you need, it's useful to remind yourself why you wanted life insurance. If for example you wanted cover to pay off any outstanding debts, naturally the level of cover should match this. If you also want enough cover for your family to maintain their lifestyle and home, it could be sensible to think about the following:

• your outstanding mortgage debt
• utility, transport and grocery costs
• outstanding loan payments
• education fees

How long you're covered for is decided by you, but for obvious reasons, most insurers will set a limit to the age they'll cover you until - usually around 77-80 years of age. This can vary between providers and any extras, such as critical illness cover, that you've included too.

The longer the term, the more expensive premiums will be, so an easy way to lower premiums is to shorten the term. Working out when you're depended on less financially - say for example when your mortgage is paid off or when your children finish university - is a good starting point.