Burial insurance can provide a variety of benefits but, at minimum, offers a payout upon your passing — aka the death benefit. The cost of the policy and subsequent benefits involves individuals paying a premium, which can be paid a variety of ways. Regardless of the amount of a premium, it’s usually based on various factors depending on the coverage amount, insurance company, the person’s age, and their health status. Most commonly, the initial payment and total payments can depend on the payment structure of the premium.
The premium payment structure could affect what the initial premium is, if it will increase, and how it might increase. One type of structure is referred to as a “leveled premium.”
Before deciding whether a leveled premium is a suitable payment structure, it’s important to understand what it is, and the pros and cons associated with it.
Leveled Premium Defined
A leveled premium structure is a payment structure that provides fixed premium amounts. In other words, the amount of the premium will not change over the course of the life insurance term, whether it be 10, 15, 20, or 30 years. So regardless of where someone is within their life insurance policy term, the premium will be the same amount as when they entered the policy.
Most commonly, level premium structures have a higher initial premium amount than other types of structures, but they’re organized in a way that provides increased coverage as the policy ages. This is different from other types of premium systems and life insurance options as premiums may be subject to “rate hikes”, or an increase in costs, whereas the amount within a leveled premium option is guaranteed.
Pros and Cons
The major positives to having a leveled premium relate to how people can plan their financial future knowing exactly what their costs are going to be over the term of their life insurance policy. Many look at this as having a set amount that they can plan for.
In addition, even though the amount someone pays would stay the same, they still have the benefit of increasing coverage over a long period of time. The only major downside to entering a leveled premium is that the initial amount could be more than other policies but even so, they are worth more.
- To keep a burial insurance policy effective, policyholders are required to pay (in most cases) monthly premiums.
- When determining what insurance policy is best, it’s important to consider the different kinds of payment structures available to pay premiums, which can ultimately affect the initial amount and future amounts.
- These amounts are usually based on age and other factors.
Leveled premiums are a type of premium payment structure that’s available, offering a fixed and guaranteed amount that will be required. Having a guaranteed premium for the life of the policy can have various benefits and limitations, but could offer participants a better opportunity for financial stability.
Need More Information?
If you need more information about your funeral insurance options, premiums, or capped premiums, we can help. Senior Life Services is your partner for life! Call 800-548-3249 for expert guidance and to find the coverage that works best for you.