3.2.2 Level Term
Level term policies do not fluctuate in face value. The face value remains the same throughout the duration of the policy. If the death benefit is $50,000 on a five-year policy and if the insured dies at any time within that five-year span, the policy will pay out $50,000.
However, if the insured does not die within the five-year period, the policy expires (at year end) with no payout. The same is true if the policy is set up to expire when the insured reaches a certain age rather than at a specific time (expiration would take place on the insured's birthday).
Mike is a 40-year old married male and he and his wife, Bev, have just purchased a new home for $100,000 with a 30-year mortgage. He wants to make sure that Bev is left with enough funds to be able to pay off the mortgage if he should die prematurely. Mike decides to take out a level term policy for $100,000 to expire when he reaches age 70. The home should be paid off by then and Bev will be financially safe from losing their home.
