What is a key disadvantage of level term assurance?

Level term assurance is a type of life insurance that provides coverage for a specified term, with a fixed sum assured that remains constant throughout the policy. A key disadvantage of this type of insurance is that it can lead to over-insurance. This occurs when the sum assured does not align with the actual insurance needs over the long term due to changes in circumstances such as lifestyle, financial obligations, or inflation.

For instance, if an individual secures a level term policy for a significant amount and their financial situation improves or their debts decrease, they might end up with more coverage than necessary. Over-insurance can mean that premiums paid are higher than what is required, resulting in a less efficient use of resources for the policyholder.

In contrast, while level term assurance does not offer an investment component, this aspect is not inherently a disadvantage depending on the individual's financial strategy. Some may prefer purely protection-focused policies without investment ties, thereby not viewing it as a disadvantage. The long-term coverage aspect can be a concern depending on the term’s duration, and while it is generally less expensive than whole life insurance, that does not equate to a direct disadvantage.