UK Accounting Glossary
Level premium insurance is a type of life insuinsurance policy with premiums that remain the same throughout the life of the level premium insurance policy. Level premium insurance shouldn’t be confused with level term insurance, which refers to insurance with a benefit that remains the same throughout the term. Most whole life insurance policies are level premium insurance policies; some term life insurance policies are also level premium insurance policies (also known as guaranteed rate policies). One advantage of level premium insurance is the security it provides a policyholder who can gauge the policy’s affordability throughout its term, knowing that the premiums will not increase. Though the premiums on a level premium insurance policy will be higher than the actual cost of the policy during the first years of the level premium insurance policy, they will be lower than the actual cost during the later years (the purpose of a level premium insurance policy is to level out the cost of the policy across time).
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This glossary post was last updated: 10th February 2020.