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.
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.
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.
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.
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:
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.
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:
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.
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.
30 Years Old
40 Years Old
50 Years Old
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’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.
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.
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.
Guardian is a relaunched protection brand with a number of unique features to its policies.
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
LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.
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.
Founded in 1812, Scottish Widows is today part of Lloyds Banking Group.
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.
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.
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.
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.
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 email@example.com.
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.