Level Death Benefit

AAA

DEFINITION of 'Level Death Benefit'

A life insurance payout that is the same whenever the insured person dies, whether shortly after purchasing the policy or many years later. Compared to a policy that provides an increasing death benefit, one that provides a level death benefit will be less expensive (that is, the premiums will be lower for the same amount of initial benefit). However, inflation will diminish the value of the level death benefit over time.

INVESTOPEDIA EXPLAINS 'Level Death Benefit'

A level death benefit is one of two death-benefit options available under many universal life insurance policies; the other is an increasing death benefit.

A universal life policy has two components: a cash value component and a pure insurance component. When the policy holder chooses the level death benefit, the value of the pure insurance component decreases over time to keep the death benefit the same while the policy’s cash value increases. If the policy holder chooses the increasing death benefit option, the pure insurance component will remain the same over time; so as the policy’s cash value increases, the death benefit increases.

Term life insurance policies also offer a level death benefit; whether the policyholder dies five years into the term or 20 years into the term, the death benefit will be the same. 

RELATED TERMS
  1. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
  2. Losses and Loss-Adjustment Expense

    The portion of an insurance company’s reserves set aside for ...
  3. Section 7702

    The section of the United States Internal Revenue Code that defines ...
  4. Nonstandard Auto Insurance

    Auto insurance offered to drivers considered to carry the most ...
  5. Independent Insurance Agents & ...

    Independent agents who shop around at different insurance companies ...
  6. Disease Management Program

    Disease management programs can help control health care expenses ...
Related Articles
  1. Why You Don’t Need Mortgage Protection ...
    Insurance

    Why You Don’t Need Mortgage Protection ...

  2. Life Insurance Policies For Stay-At-Home ...
    Insurance

    Life Insurance Policies For Stay-At-Home ...

  3. The Best Type Of Life Insurance For ...
    Budgeting

    The Best Type Of Life Insurance For ...

  4. When Life Insurance Isn't Worth It
    Insurance

    When Life Insurance Isn't Worth It

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center