Decreasing term life insurance explained

Decreasing term life insurance is generally used to ensure that should you die, or are diagnosed with a terminal illness and are eligible to claim (although not in the last 18 months of the plan), there will be a lump sum available to help pay off your repayment mortgage.

The idea of decreasing term life insurance is to help cover the value of the remaining mortgage during the term of the policy. As you pay off your repayment mortgage each month, the sum you will need to cover the remaining mortgage decreases and therefore the life insurance cover you need to pay it off is less. Please note the amount of cover decreases roughly in line with your mortgage.

For example, were you to die at the start of a 25-year mortgage for £100,000, you would want £100,000 to be available. Both decreasing term life insurance and level term life insurance (see page below for an explanation of level term life insurance) would pay out £100,000 at this time, subject to terms and conditions. But after 20 years, your mortgage may only have £8,000 outstanding. If you were to die at that point, your decreasing term life insurance policy should provide enough to cover the outstanding mortgage amount (figures are an estimation and will vary depending on actual interest rates). Level term assurance would pay out £100,000.

Why choose decreasing term life insurance?

People may choose decreasing term life insurance because the monthly premiums are usually cheaper than level term life insurance. If your prime concern is helping to leave a roof over the heads of your dependents in the event of your death, or being diagnosed with a terminal illness, it could be a cost-effective solution.

Get your decreasing term life insurance quote now.

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