Decreasing Term Life Insurance is a cost-effective way of protecting your loved ones from having to cover the remaining balance on your repayment mortgage when you pass away. If you are looking for a life insurance policy that simply covers your mortgage, decreasing term life insurance will do just that.
Millions of UK homeowners rely on a mortgage to purchase their property, which makes decreasing term life insurance a popular protection product.
What is Decreasing Term Life Insurance?
Decreasing Term Life Insurance is specifically designed to cover the balance of a repayment mortgage. Where the total balance decreases over time, so does the payout of a decreasing term life insurance policy. Put simply, decreasing term is a type of life insurance policy that pays out less over time.
How does Decreasing Term Life Insurance work?
When you take out a decreasing term life insurance policy you typically arrange your cover for the remaining balance on your mortgage for the length of time left on your mortgage. You pay fixed monthly premiums throughout your policy term, but the payout decreases over time in line with your mortgage.
Should I get Decreasing Term Life Insurance?
Life insurance is a sensible option for those who have dependents who rely on them to meet mortgage payments. Decreasing term life insurance is best suited to those with a repayment mortgage who may be on a tighter budget but still want to protect their loved ones when they pass away.
If you can stretch your budget a little further, you may want to explore level term life insurance as an alternative option as the payout is fixed rather than decreasing. If you are unsure which type of policy may be more suitable for you it’s best to speak to a consultant.
The simplest way to work out if you should get decreasing term life insurance is asking yourself, what would happen to your outstanding mortgage if you passed away?
- Who would be left to cover your mortgage payments?
- Could they afford to cover this monthly commitment without you?
- If they would not be able to afford the repayments, would they have to downsize?
- Would they have to sell your home to meet their general living costs?
- Even if they could afford the mortgage payments, could they also meet the household running costs?
If your partner, family, or loved ones would find themselves in financial difficulty due to your passing, you should probably consider life insurance to protect them.
Why should I choose Decreasing Term Life Insurance?
Decreasing term life insurance is a budget-friendly way to protect your loved ones from financial difficulty should you pass away. Premiums are often cheaper than standard life insurance policies because this type of policy is simply designed to cover your repayment mortgage.
Your mortgage decreases over time (as you make payments) so the sum assured also reduces in line with your remaining balance. This reduces the risk to the insurer which is why they can offer more affordable premiums. If you were to pass away, the payout would cover the remaining balance on your mortgage and allow your loved ones to continue to live in their home. If you only require insurance for your repayment mortgage, decreasing term life insurance is a fantastic protection product. If you have an interest-only mortgage, decreasing term life insurance is not a suitable product.
There are many reasons to use a life insurance broker, including making sure you have accurate and valid cover that will protect your loved ones at their time of need. If you are unsure which protection product is right for you, it’s best to speak to one of our consultants.
How much does Decreasing Term Life Insurance cost?
Most life insurance premiums are calculated depending on the risk to the insurer. Because the sum assured decreases over time, Decreasing Term Life Insurance can be a cheaper way to cover your repayment mortgage. Some insurance providers offer policies from as little as £5 per month, but to get an accurate quote it’s best to speak to a consultant.
Generally, decreasing term life insurance is considered more affordable than level term and whole of life cover. This is because the insurance provider is less likely to pay out a large sum. Many factors can affect your premiums, so it’s always best to get an accurate quote to avoid surprises later in the process. These factors include standard information such as the level of cover you need and how long for, as well as personal information such as your age, medical history, and whether you smoke. The higher the risk you pose to the insurer, the higher your premiums will be.
Compare Decreasing Term Life Insurance Quotes
The cost of a decreasing term life insurance plan can vary significantly between insurers. Before arranging cover, it’s best to compare quotes from across the insurance market to find the right cover for an affordable price. Some insurers may offer incentives when you take out a policy, however, it’s important to think long-term when arranging your policy. For example, if your term is 30 years, will you still be able to meet the fixed monthly premiums near the end of the policy term? It’s important to factor in your age of retirement and any pension entitlement to make sure your premiums are affordable for the entire policy term.
There are many great reasons to use a life insurance broker, including getting help from an expert. We at Freedom to Insure take the hassle out of gathering quotes and comparing policies to help you find the very best plan. And if you decide not to go ahead, you won’t be hassled by us. The final decision is always yours.
Is Decreasing Term Life Insurance good value for money?
Decreasing Term Life Insurance can be great value for money if you are simply looking to cover your repayment mortgage. It typically offers cheaper monthly premiums than Level Term Life Insurance because the lump sum payout decreases over time in line with your mortgage. This does of course depend on your personal circumstances though.
For example, if you are over 50 you may find better value in a specialised over 50s life insurance policy. When trying to work out which life product is most suitable and affordable it’s best to speak to a life insurance broker. They are experts in their field that can help you find the right policy, at the right price.
Decreasing Term Life Insurance Pay Out
Your loved ones can claim the payout if you pass away during the policy term. The size of the payout depends on how far into the policy you pass away, as the sum assured decreases over time.
Can I get joint Decreasing Term Life Insurance?
Yes, it is possible to arrange a joint decreasing term life insurance policy. In fact, this is often a cost-effective way for two people to protect each other. It is important to know that even though two people can take out a policy together, once the cover pays out upon the first death the policy ends leaving the surviving person uninsured.
What happens if I remortgage during my Decreasing Term policy?
People often remortgage to secure a better rate, buy a larger property, or when planning to make home improvements. Remortgaging during a policy is incredibly common, so insurers are used to dealing with changes. When you remortgage it is vital to make sure your decreasing term life insurance policy is updated to reflect the level of cover you need. Otherwise, an outdated policy may no longer be fit for purpose. You may find yourself insured for an inadequate sum over an incorrect term depending on your new mortgage.
There are two things you can do to change your cover when you remortgage. The first is contacting your existing insurance provider to see how they can accommodate your new mortgage and the potential change in your monthly premiums. The second is comparing prices from across the insurance market again through a life insurance broker. It is always beneficial to compare policies, even if you decide to stay with your current provider. A good life insurance policy should provide complete peace of mind, not only that your loved ones are protected, but also that you aren’t paying over the odds.
Decreasing Term Life Insurance with Critical Illness Cover
When you arrange your decreasing term policy, you will have the option to include critical illness cover for a small additional cost. Adding this to your policy means you are also covered if you fall critically ill for a prolonged period of time. To make a claim, your illness must be critical but not terminal. If you are unsure it is best to speak to a life insurance broker to clarify exactly what you are and aren’t covered for.
Important things to know about Decreasing Term Life Insurance
- It is typically the cheapest way to cover a repayment mortgage
- The sum assured (the amount that gets paid out) decreases over time
- The further into your policy term you pass away, the smaller the payout will be
- A decreasing term life insurance policy has no cash value unless a valid claim is made. It is not a savings product
- The lump-sum payout decreases over time in line with the remaining balance on your repayment mortgage
- Fixed monthly premium; once agreed, your premiums will never increase
- This life insurance product is not suitable for those with an interest-only mortgage.
Can I cancel Decreasing Term Life Insurance?
Yes, much the same as other insurance policies, you can cancel at any time. You do this by contacting your insurer and stopping payment of your premiums. It is important to note that as soon as you stop paying your premiums you are no longer covered. If you cancel and then decide you need cover again, you cannot simply reinstate your old policy and start paying again. You will have to take out a new policy which may inflate your monthly premiums due to you being older than when you first arranged the policy.
Why should I choose Freedom to Insure to arrange my Decreasing Term Policy?
Freedom to Insure is a life insurance specialist with access to information from the entire life insurance market, so you can rest assured we’ll find the most competitive and suitable policy for you.
We don’t encourage our customers to take out a policy with a particular insurer. Instead, you’ll tell us what you need from your policy and we’ll provide all of your options. Although many of the factors which determine the cost of cover can’t be changed, your personal consultant can explain the various options. This will ensure you have the most appropriate and affordable policy.
Our life insurance specialists will compare quotes on your behalf, present you with the most affordable options, complete your application for you, and make sure you’re clued up every step of the way.
If you want to find out more, or get a free no obligation quote, fill in the form below. One of our life insurance experts will be in touch. Alternatively, give us a call on 0203 092 1372, or visit our contact page.
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