When taking out life insurance you will have the option of choosing between decreasing and level cover. This blog explains the main differences.
Decreasing Term Insurance
The sum insured reduces over time. This is commonly used to protect a repayment mortgage.
With a repayment mortgage, the mortgage loan reduces with each payment made. With decreasing life insurance, the sum insured will decrease by a set interest rate to mirror a repayment mortgage.
Provided the mortgage interest rate is always lower than the insurance decrease rate, this type of cover ensures that if the policyholder were to die, the beneficiaries can pay off whatever remains on the mortgage.
Level Term Insurance
The sum insured will remain the same for the entire policy term. This is commonly used to protect an interest-only mortgage.
With an interest-only mortgage, the amount you owe remains the same throughout the term.
Provided you do not take out any extra borrowing on your mortgage, and provided you make the payments when due, this type of life cover ensures that if the policyholder were to die, the beneficiaries can pay off the mortgage.
How can we help?
Advice is key when taking out life insurance.
Protection professionals, like ourselves, have a vast knowledge of the options available and we can recommend the most appropriate plan your individual circumstances.
To speak to an adviser please call us on 01455 63 61 63 or book an appointment. We never charge a fee for protection advice.
https://onerooffinancial.co.uk/contact/
Your home may be repossessed if you do not keep up repayments on your mortgage.
Blog written 04/03/2025
The information contained within this blog was correct at the time of publication (04/03/2025), and is subject to change.
