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Ensure your dependents can pay off your mortgage if you die


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Decreasing-term life insurance can help you to ensure there are no mortgage repayment worries left behind for your family if you die.

In This Guide:

What is decreasing term life insurance?

Designed to help protect a repayment mortgage or similar debt, decreasing-term life insurance can pay out a cash sum in the event of your death.

When taking out decreasing life insurance you will be covered for a fixed period or ‘term’. You pay premiums either monthly or yearly, and the total cover provided will decrease over that period. By the end of the policy, the pay-out will be zero.

The length of the term should correspond with the remaining balance on your repayment mortgage, meaning you will have cover in the event of your death and the remaining mortgage can be repaid. If you make any changes to your mortage arrangements then you will have to review your life cover and may need to take new cover. You should also check that the length of the policy is long enough to cover the duration of your mortgage term.

Decreasing-term life insurance is often cheaper than standard insurance as the nature of the policy makes it less expensive for insurers.

With decreasing-term life insurance, your payments stay the same throughout the length of your policy unless you change your policy.

Decreasing-term vs level-term cover

Decreasing term life insurance suits those who wish to be covered for the remaining mortgage repayment on their home, so that loved ones can repay the balance of the mortgage if they pass away. The cover provided by a decreasing-term policy reduces over time, broadly in line with the balance on a repayment mortgage.

Level-term insurance pays out a pre-agreed fixed sum in the event of the policyholder’s death. This means that the cover does not reduce and may provide more cover than needed to repay a mortgage.

With all types of cover, any mortgage repayments or other debt will not be directly covered and it is up to the person who receives the insurance to decide what to do with it.

Level-term life insurance could be beneficial to those who have minimal debt and wish to leave their loved ones a cash sum when they die which they could use for different purposes. With level term cover, the amount of insurance received in the event of death stays the same for the duration of the policy.

Mortgage life insurance

Subject to your policy, mortgage life insurance could differ in that the total amount paid out may go directly to the mortgage providers. 

This means that the remaining balance due on the mortgage will be covered but doesn’t offer the same flexibility as decreasing-term insurance for paying other debts.

Decreasing term life insurance with critical illness cover

Like with other life insurance policies, it is often possible to add critical illness cover to your decreasing-term life insurance plan.

Critical illness insurance will cover you against falling seriously ill. It could pay out a cash sum to help cover any financial commitments if you’re diagnosed with a condition that is specified in your policy documents. This can include a heart attack, stroke and several types of cancer.

It’s important to note that your premiums will rise due to the extra level of insurance, so you will want to take this into account before adding critical illness insurance to your policy.

Who is decreasing term life insurance for?

As well as being a great option for those looking to have a stable mortgage repayment insurance option that will always cover the amount in line with how much is being paid on the mortgage, decreasing-term policies may also be great if you’re starting a family.

As your children grow and become self-sufficient, the size of the pay out they would need in the event of your or your partner's death may decrease. A decreasing-term plan could insure there is always enough to cover them whilst still offering lower premiums than level-term plans.

It is worth noting that decreasing-term life insurance is not suitable if you have an interest only mortgage. The balance of an interest only mortgage doesn’t reduce and stays the same until the end of the term, so decreasing insurance won’t cover you for the full amount.

As the amount you’re covered for decreases over time it is important to check that the level of interest you are paying on your premiums is in line with how much your cover will depreciate versus your outstanding mortgage debt.

Related guides

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Last reviewed: 1 February 2023

Next review: 1 March 2023