The difference between Level Life Insurance and Decreasing Term Insurance is how the benefit is treated over time.
Decreasing Life Cover as the name suggests, sees the benefit fall over time, reaching zero by the end of the policy’s term. This makes it particularly suitable for covering a straightforward repayment mortgage, where the outstanding debt also falls to zero by the end of the mortgage.
Make sure the interest rate assumed by your insurer / the policy doesn’t see your cover decrease faster than your mortgage, which could potentially leave you with a protection shortfall.
Level Life Insurance, on the other hand, sees the benefit remain fixed over time. This means that the amount you’ll receive if you die within the first year of the policy is the same as if you died in the last year of the policy.
A level policy is therefore more suited to covering an interest-only mortgage, where the outstanding capital balance doesn’t fall over time. It’s also well-suited to providing a constant level of family protection throughout the policy term.