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Decreasing Life Insurance

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What Is It and What Does It Cover?

Decreasing Term Life Insurance is a form of Life Insurance which reduces over time paying out a cash lump sum benefit should the policyholder die. This makes it particularly suitable for covering an outstanding repayment mortgage, where the figure you owe also falls over time.

  • It pays out a tax free cash lump sum on death.
  • The figure you’re insured for falls over the ‘term’ of the insurance in line with an outstanding debt such as a mortgage.
  • It provides you with peace of mind knowing those closest to you will be financially secure should you pass away.
  • Option to include Critical Illness Insurance to provide a cash lump sum should you suffer a serious illness, such as cancer, heart attack or stroke.

How Does Decreasing Life Insurance Work?

If you were to take out a policy worth £200,000 for 25 years and had a mortgage term for the same length of time, the policy’s benefit and your debt would gradually decrease until the end of the policy and mortgage term where they would both equal zero.

Should you pass away at any point during the mortgage, the level of cover provided by the reducing life insurance would be enough to pay off the outstanding debt. Decreasing Life Insurance is the most cost effective way of protecting a repayment mortgage.

life insurance decreasing cover graph

What About Protecting An Interest Only Mortgage?

If you are looking to protect an interest-only mortgage or are simply looking for a level of cover which is fixed over the life of the plan then a more suitable option may well be Level Term Life Insurance.

If you were to set-up a Level Life Insurance policy covering £100,000 for 25 years, should you die at any point during the 25 year term it would pay out the full £100,000. Where it provides a much greater level of cover the cost is significantly higher than Decreasing Life Insurance.

Do I Need Reducing Life Assurance?

To decide whether you need Decreasing Life Cover, ask yourself if you have any financial risk, such as a repayment mortgage or other debt. If the answer is yes then many people want to protect such debts should the worst happen.

If you take out Decreasing Term Life Insurance you can ensure that the debts you have are taken care of and not left to your loved ones after you die, potentially leaving them in financial hardship.

This could be especially important in the case of a mortgage on the family home, where your loved ones may have to give up the property if they cannot keep up with the mortgage after you’re gone.

Of all the Life Insurance products available Decreasing Term Insurance is generally the cheapest. This is because as the level of cover decreases over time the risk to the insurer is also declining; the longer the policy runs, the lower the payout the insurer will have to make in the event of a claim.

What Is The Risk Of Passing Away?

In our Health and Protection Survey we found out just how much we all underestimate the risk of death.

We are SIX times more likely to pass away before retirement than most people think

To help put things into perspective, using ONS Life Expectancy data we calculated the likelihood of death by the age of 60 for healthy people of the following ages:

Male

Female

30 Years Old

1 in 12

1 in 18

40 Years Old

1 in 13

1 in 20

50 Years Old

1 in 19

1 in 28

This can help you understand the risks we all face in life and why so many people choose to protect themselves and their families with Life Insurance.

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How Much Does Decreasing Life Insurance Cost?

The price of a Decreasing Life Insurance policy will vary from individual to individual depending on their circumstances.

The main personal factors that will be priced into the cost of a policy are:

  • Your age
  • Your state of health
  • Your smoker status.

For example, if you are a 60-year-old smoker with a medical condition such as heart disease, your premiums will be a lot more expensive than a 30-year-old non-smoker who does not have any pre-existing health issues.

It is not just personal factors that will affect how much your insurance will cost but also your policy policy options.

  • Level of Cover
    The sum of money you would like to protect, the more you would like to cover the higher the monthly premiums will be.
  • Length of Cover
    The length of time you would like to be protected by the policy, the longer you would like to be covered the higher the risk of something happening and so the higher the monthly premiums.
  • Include Critical Illness Insurance
    In addition to paying out on death, the policy will pay out should you suffer a serious illness such as cancer, heart attack or stroke. Where the risk of suffering a critical illness is much greater it is reflected in significantly higher premiums.

Below are some sample monthly Decreasing Life Insurance premiums for £250,000 worth of cover over a 20 year period for a healthy individual of various different ages.

Age

🚭
🚬

30 Years Old

£6.30

£10.68

40 Years Old

£10.92

£20.63

50 Years Old

£24.03

£55.37

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Frequently Asked Decreasing Life Insurance Questions

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    What is the Best Decreasing Life Insurance?

    Which Life Insurance company is best for you will depend on your needs and circumstances. It’s something that’s best to discuss with your adviser.

    However, you can compare the top 10 Life Insurance companies in the UK using our overview table below.

    aegon

    Aegon

    Aegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.

    • Minimum entry age: 18
    • Maximum entry age: 89
    • Minimum term: 1 year
    • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
    • Maximum cover: Unlimited
    aig

    AIG

    US insurance giant American International Group, Inc. (AIG) was first founded in 1919 and since then has grown to operate on a global scale. It provides a range of protection products for both individuals and businesses.

    • Minimum entry age: 18
    • Maximum entry age: 88
    • Minimum term: 2 years
    • Maximum term: 70 years (cover must end before an individual’s 90th birthday)
    • Maximum cover: Unlimited
    aviva

    Aviva

    Aviva was founded in 1797, but the Aviva brand as it is today was formed in 2000 by the merger of Norwich Union and CGU PLC.

    • Minimum entry age: 18
    • Maximum entry age: 89
    • Minimum term: 1 year
    • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
    • Maximum cover: Unlimited
    guardian

    Guardian

    Guardian is a relaunched protection brand with a number of unique features to its policies.

    • Minimum entry age: 18
    • Maximum entry age: 65
    • Minimum term: 1 year (Level and Increasing Cover) / 5 years (Decreasing cover)
    • Maximum term: 72 years (cover must end before an individual’s 90th birthday)
    • Maximum cover: £15 million
    legal & general

    Legal & General

    L&G was formed as an insurance company for lawyers, by lawyers in 1836. It has since grown to become one of the country’s best-known financial services companies

    • Minimum entry age: 18
    • Maximum entry age: 77
    • Minimum term: 1 year (Level Cover) / 5 years (Decreasing cover)
    • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
    • Maximum cover: Unlimited
    liverpool victoria

    Liverpool Victoria

    LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.

    • Minimum entry age: 17
    • Maximum entry age: 79 (Level or Decreasing cover) / 59 (inflation-linked cover)
    • Minimum term: 5 years
    • Maximum term: 45 years
    • Maximum cover: Unlimited
    royal london

    Royal London

    Royal London previously operated Scottish Provident and Bright Grey as separated brands providing Critical Illness Insurance under the Royal London umbrella. From 2016, both were merged into the main Royal London brand.

    • Minimum entry age: 18
    • Maximum entry age: 70
    • Minimum term: 1 year
    • Maximum term: 72 years
    • Maximum cover: Unlimited
    scottish widows

    Scottish Widows

    Founded in 1812, Scottish Widows is today part of Lloyds Banking Group.

    • Minimum entry age: 18
    • Maximum entry age: 79 (must end before individual’s 90th birthday)
    • Minimum term: 1 year (Level and Increasing) / 3 years (Decreasing)
    • Maximum term: 72 years
    • Maximum cover: £25,000,000 (Level and Decreasing) / £15,000,000 (Increasing)
    Vitality

    Vitality

    Vitality entered the UK market in 2007 with a joint venture with PruHealth and PruProtect, part of the Prudential Group. It has since bought out Prudential and is now branded solely as Vitality.

    • Minimum entry age: 16
    • Maximum entry age: 74 (cover must end before age 90)
    • Minimum term: 5 years
    • Maximum term: No maximum (cover must end before age 90)
    • Maximum cover: £20,000,000
    zurich

    Zurich

    Zurich is a Swiss-based global insurance giant, operating in more than 170 countries. It employs around 55,000 employees worldwide, including 4,500 in the UK.

    • Minimum entry age: 16
    • Maximum entry age: 83 (must end before individual’s 90th birthday)
    • Minimum term: 1 year
    • Maximum term: 50 years
    • Maximum cover: £40 million

    Advice on Decreasing Life Insurance

    We are whole of market independent life insurance experts. We live and breathe protection and it’s unlikely you can throw a question or scenario our way that we’ve not come up against before.

    Why Speak to Us…

    We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

    • There is no fee for our service
    • We are independent and impartial
      Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
    • We’ve got bargaining power on our side
      This allows us to negotiate better premiums for you than you going direct yourself.
    • You’ll speak to a dedicated expert from start to finish
      You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
    • Benefit from our 5-star service
      We pride ourselves on providing a 5-star service, as can be seen from our 2428 and growing independent client reviews rating us at 4.92 / 5.
    • Gain the protection of regulated advice
      You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
    • Claims support when you need it the most
      You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

    More than anything, we’re here to help people and are capable of pairing your personal circumstances with the perfect insurance policy.

    If you are unsure of anything or just want some general guidance please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

    Robert Harvey
    Independent Protection Expert at Drewberry

    I had the pleasure of dealing with Jake Mills in organising my insurance. Jake was fantastic to deal with — his patience and understanding really helped.

    Brendan Kelly
    26/09/2019
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