Level or decreasing term mortgage life insurance?

I have recently taken out a mortgage with my wife and need life insurance in case one of us were to pass away. What is best decreasing mortgage life insurance or level term life insurance, which type of cover do I need?

Question asked by Ian Norman
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Answered by Tom Conner

Whether you should take out level term insurance or decreasing term life insurance generally dependents on what type of mortgage you have, either a repayment or interest only loan.

Decreasing term life insurance

For a capital/principal repayment mortgage (where the amount of debt outstanding on the loan gets paid down over time) it usually makes sense to take out decreasing term mortgage life cover.

With this type of policy the amount of cover will decline over time broadly in-line with the amount outstanding on your loan (unless interest rates rise considerably the life insurance policy should always contain enough cover to repay the mortgage at any point in time). This represents the most cost-effective method of gaining life cover.

Level term life insurance

For an interest only mortgage (where the level of debt remains fixed of the term of the loan) it usually makes sense to take out level term mortgage life cover.

With this type of policy the amount of life cover remains fixed over the term of the plan so as to stay in-line with the fixed amount of mortgage debt.

For more information please see the page: Level Life Insurance or Decreasing Life Insurance?

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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