Decreasing term life insurance

What is decreasing term life insurance?

Should the worst happen and you die, life insurance could help financially support the loved ones you leave behind. A payout could be used to pay off debts like your mortgage, loans and credit cards, as well as providing money for living expenses.

Decreasing term life insurance could be an affordable way of getting that financial protection. It tends to be cheaper than level term because the amount paid out in the event of your death reduces over time – roughly in line with a repayment mortgage. That’s why you’ll also hear decreasing term cover called mortgage life insurance.

Although designed to pay off a specific debt or debts, the cash lump sum can be used however the beneficiaries wish.

Why pay more than you need to if you only want to cover a specific debt?

You choose:

  • The amount of cover you need
  • The length of time the policy will run for – usually to match at least the length of the loan

If you have a valid claim, a lump sum will be paid in the event of your death.

How does decreasing term differ from level term insurance?

Level Term Decreasing Term
Offers financial security to your family. Offers financial security to your family.
Fixed policy term and monthly premiums. Fixed policy term and monthly premiums.
The payout remains the same throughout the term, unless you change your policy. The payout reduces over time, roughly in line with repayments on loans, e.g. a mortgage.
If you applied for £200,000 and died within the term, that amount would be paid out. If you applied for £200,000 and died within the term, the amount paid out would reflect how long has passed since the policy started.

Is it right for me?

A death in the family can be difficult to cope with. People need time to grieve, and no-one should have to stress about money. Covering any debt means your loved ones have one less thing to worry about.

If you have loans which reduce over time, secured against assets your family rely on – such as your home or a car – decreasing term life insurance could be worth considering.

It’s up to you to decide based on your circumstances and budget.

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