DECREASING TERM LIFE INSURANCE

Whether or not decreasing term cover is right for you depends on what it is you are looking to protect and your budget.

Due to the decreasing value of the sum assured, it is not suitable for those looking to cover an interest-only mortgage.

It also may not be suitable for those wanting to cover their mortgage, as well as meet rising funeral costs or provide a fixed inheritance.

A decreasing term policy is most suitable for those looking to simply cover the balance of a repayment mortgage or provide an inheritance that will be less essential over time.

For example, if you have older children and the inheritance would simply act as a token gift rather than being essential to their financial stability.

Decreasing term life insurance is generally considered to be the most cost-effective policy type.

So, if your budget is tight, it can be a very good option.

The key difference between level term and decreasing term life insurance is the sum assured.

Unlike decreasing term which reduces in value throughout the policy, level term life insurance remains fixed, (or level).

This means that regardless of what point during the policy you pass away, your loved ones will receive a fixed sum.

Due to this increased level of cover, level term cover is generally more expensive than decreasing term for the same sum assured.

As mentioned, decreasing term cover is ideal for covering a repayment mortgage as the pay out can be set to decrease in line with your remaining balance.

Level term life insurance, on the other hand, is more suitable for covering aspects which do not reduce over time.

For example, an interest-only mortgage, an inheritance or funeral costs.

Taking out joint decreasing term life insurance, as opposed to two singles policies, can save you on average around -25%.

The biggest criticism of a joint policy is that it only pays out once, (usually on the first death). This then leaves the surviving partner uninsured.

Equally, if both partners were to die simultaneously, one pay out may not be sufficient to cover to the loss of two people, (especially if you have children).

However, if the sole purpose of the cover is to pay off the mortgage, this is likely to be sufficient to meet the needs of loved ones.

If you have additional costs to cover level term life insurance may be more suitable.

Whilst decreasing term life insurance is typically used to cover a repayment mortgage, it can also be beneficial in other instances.

For example, to cover other larger outstanding debts, such as credit cards and finance plans.

It may also be suitable for those with older children who do not feel a large pay out will be as essential in the coming years due to their growing financial independence.

As mentioned, decreasing term life insurance tends to be the cheapest form of life insurance.

Therefore, it is also ideal for those looking for some form of cover who perhaps do not have the budget for other forms of life insurance.

Despite only 6% of policyholders writing their life insurance in trust, it does not need to be a difficult endeavour.

It simply requires you to fill in an application form from your insurer once your decreasing term life insurance is active.

At Reassured, we offer a dedicated (free) service where one of our team can talk you through the process, supporting you while filling out the form and answering any questions.

All decreasing term policies arranged through Reassured come with terminal illness cover as standard.

This means, if you are diagnosed with a terminal illness and given less than 12 months to live, you can make a claim on your policy whilst still alive.

An early pay out can be used to pay for private medical treatment, adaptations to your home or most likely, pay off your mortgage providing you peace of mind that your family will be able to stay in their home.