Decreasing term life insurance
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How does decreasing term life insurance work?

Decreasing term life insurance is taken out for a fixed number of years that normally matches the length of the loan, for example, if you’ve calculated that it will take you 10 years to pay off your mortgage, you can take out a policy with a term of 10 years. As you reach the end of your term, the amount the insurer is willing to pay out reduces. If your policy is still in place in the event of your death, decreasing term life insurance pays out a single lump sum to your loved ones.

 
 

Should I get level term or decreasing life insurance?

Level term life insurance and decreasing life cover are the two main types of life insurance policies. The type of policy that you should take out depends entirely on your personal circumstances. With level term life insurance, you choose how long you want the cover to last and how much you want it to pay out. If you pass away during the policy term, your loved ones will receive the full amount. This option could suit you if you want to make sure your loved ones are financially secure in the event of your death.

When it comes to decreasing life assurance, the amount your loved ones will receive in the event of your death decreases over time. It usually holds the same value as a loan and you can set the term of your policy. Decreasing term insurance is sometimes called mortgage decreasing life insurance as it’s designed to decrease in line with your mortgage. This option is best suited to you if you want help make sure a large debt is paid off when you die.

 
 

What are the pros and cons of decreasing term life insurance?

 

Pros 

  • Monthly premiums are typically lower than other life insurance policies
  • Premiums remain the same throughout the duration of the policy term

Cons

  • Typically, you only cover yourself for the cost of your loans so there won’t be much or any money left once your loans have been paid off
  • If your benefit decreases at a faster rate than the interest rate of your mortgage, you could be left with a shortfall at claim
  • Decreasing term life insurance doesn’t work for you if you have an interest only mortgage

 

Compare life insurance providers

Compare life insurance providers on Compare by Review today. We’re the first and only comparison site that ranks life insurance providers exclusively on customer experience and product quality rather than price. Our full table of providers will give you an impartial and unbiased overview so you can purchase life insurance from a high-quality provider that you can rely on when you need them most.
 

1st

Review Score

9.7

based on 892 reviews

Life insurance quote

£7.96

per month

With critical illness cover

£26.06

per month

Minimum cover limit

£40k

Maximum cover limit

£750k

Beagle Street offers an early payout for terminal illness and all premiums are fixed and will not change.

2nd

Review Score

9.4

based on 16321 reviews

Life insurance quote

£8.61

per month

With critical illness cover

£25.73

per month

Minimum cover limit

N/A

Maximum cover limit

£1.5m

All policyholders get free access to LV= Doctor Services and terminal illness cover is included at no extra cost.

3rd

Review Score

9.2

based on 1606 reviews

Life insurance quote

£8.44

per month

With critical illness cover

£21.02

per month

Minimum cover limit

N/A

Maximum cover limit

£500k

All Royal London life insurance policies include terminal illness cover at no additional cost.