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A Decreasing Term Life Insurance policy is a type of Life Insurance which pays out a cash lump sum if the policyholder dies, at any point throughout the agreed term. The value of that cash sum decreases throughout the term of the policy; so if the policyholder were to die at the beginning of the policy, a bigger cash lump sum would be paid out than if the policyholder died towards the end of the agreed term. A Decreasing Term Life Insurance policy is most likely to protect a mortgage debt. 

 

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Why choose a Decreasing Term Life Insurance? 

A Decreasing Term policy works well to protect a repayment mortgage or similar debt. As the term of the insurance can match that of the mortgage, and the value can reduce in line with the reducing amount of debt owed.

A decreasing term could also be a good option if you have just started a family. If you or your partner were to die unexpectedly the cash sum pay out would cover the costs of supporting your children. The older your children become, the closer they are to becoming self-sufficient and the less the lump sum needed to support them until adulthood.

If allowing your loved ones to continue to live in the house and not have to worry about paying off the mortgage is your main concern, this is definitely an option worth considering.

How Does Decreasing Life Insurance Work? 

As an example - if you had a £250,000 mortgage with a 30 year term, you could take an insurance policy out, also worth £250,000 and with a 30 year term. Over the 30 year term, your mortgage debt would decrease from £250,000 to zero, once you had paid it off in 30 years. The policy’s benefit would decrease inline with your mortgage, also reaching £0 in 30 years. So if you were to die at any point during the 30 year period, the policy’s benefit would be sufficient to cover the payment of your mortgage.

What Are the Benefits of Decreasing Over Term Life Insurance?

Life Insurance offers the financial security and peace of mind, that should you pass away, those who rely on you financially would be financially secure. The benefit of a decreasing term Life Insurance over that of a level term policy is that the monthly premiums are normally less. Decreasing Term Life Insurance is generally the cheapest Life Insurance policy available, as the risk to the insurer decreases, the longer the policy runs.

Life Insurance and Inflation

It is possible with some policies to protect the policy against the effects of inflation, to ensure your payout sum won’t be worth less in real terms in the future, due to the rise in the cost of living. Your monthly payments would also rise along the same lines.

 

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Life Insurance Guides

Below are our in-depth guides to help you decipher the various health insurances available and learn more about how they work. Don't forget our advisers are always at the end of the phone to offer free, expert advice should you prefer to speak to someone in person.

We Work With the UK's Leading Life Insurance Providers

 

Aegon is one of the world’s largest financial services organisations with over 2000 employees in the UK. They have been helping customers achieve financial security since they started as Scottish Equitable in 1831.  
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American International Group, also known as AIG was founded in 1919 and is a US insurance giant, providing a range of protection products.  
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AVIVA PLC is the largest general insurer in the UK and a multinational insurance company with about 33 million customers across 16 countries, founded in 1797.  
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Guardian have been helping people protect their future and secure their lives for more than 160 years. They are one of the largest mutual life insurance companies in the world, serving 29 million people, founded in Manhattan in 1860.  
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One of the country’s best known financial services company, originally formed in 1836 by lawyers, for lawyers. Legal & General is a British multinational with headquarters in London.  
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One of the UK’s largest personal lines insurers, founded in 1843, with more than 7 million customers and over 4,000 employees.  
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Old Mutual is a leading UK-based wealth management provider, offering a range of flexible products and investment solutions. Trusted by 448,000+ customers. 
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Founded in 1861, Royal London are the UK’s largest mutual life, pensions and investment company. The Royal London Mutual Insurance Society Limited, along with its subsidiaries, is the largest mutual insurer in the United Kingdom, with Group funds under management of £100 billion. 
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Shepherd’s Friendly Society is a UK friendly society and one of the oldest insurers in the world, founded in 1826. It has over 100,000 members with headquarters in Cheadle, England.  
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The Exeter are one of the largest friendly societies in the UK with over 90,000 members and more than 100 employees. They were founded in 1826 and their headquarters is in the city of Exeter. 
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VitalityLife is a UK based company specialising in life insurance with over 1 million UK customers. The Vitality brand is well-known for its incentive-based model encouraging healthy living in exchange for rewards. 
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Zurich Insurance Group is a leading multi-line insurer with about 55,000 employees, providing services in more than 215 countries and territories. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872.   
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