Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

Do you need Level Term or Decreasing Term Mortgage Life Insurance?

Level or Decreasing Term Mortgage Life Insurance?

There are two types of Mortgage Life Insurance that you can choose from, both of which are tailored to suit different types of mortgages.

Level Term Mortgage Life Insurance sees the benefit stay fixed over time and is therefore best-suited to cover interest-only mortgage loans.

Decreasing Term Mortgage Life Insurance is designed to cover capital/principal repayment mortgages, where the amount outstanding falls over time along with your mortgage.

Both of these types of policies have benefits and drawbacks that make them more less suitable for certain people. For that reason, you will need to think carefully about whether you need Level or Decreasing Term Mortgage Life Insurance.

Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Level of Cover
per
month
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at
 

What are the Different Types of Life Insurance for My Mortgage?

A mortgage is a long-term commitment and many people are worried about what would happen to the debt, their family and their home if they passed away before they could pay off the loan.

So if you are looking to protect your mortgage in the event of your death, Mortgage Life Insurance is one of the first and most relevant protection products you will find.

Term Mortgage Life Insurance is a type of insurance that will pay out a lump sum to your loved ones in the event of your death. It’s referred to as ‘term’ insurance because it’s usually set to match the fixed term of your mortgage.

Protect your loved ones and your home with the right kind of Mortgage Protection Insurance.

The amount your policy will pay out is designed to match or slightly exceed the cost of your mortgage, so your loved ones can repay the mortgage with the insurance payout.

However, there are two different types of Mortgage Life insurance that you need to choose from: Level or Decreasing Term Life Insurance.

The type of Mortgage Life Insurance is right for you will be influenced by the type of mortgage you have, the level of cover you want, and how you intend the benefit from the policy to be used.

Life Expectancy Calculator

Your Current Age
  years  
Risk of Death in next
  years  
Gender
verisign seal
We have designed this calculator using data from the Office for National Statistics to help you understand the risk of death during the term of your mortgage. Simply enter your details to find out...

Your Life Expectancy Results

 

What is Decreasing Term Mortgage Life Insurance?

As the name would suggest, Decreasing Term Mortgage Life Insurance is a type of insurance that decreases over time alongside a mortgage such as a capital/principal repayment mortgage loan.

 

How Does Decreasing term Mortgage Life Insurance Work?

As you repay your mortgage, the amount that you are covered for decreases each year, eventually to zero like the mortgage balance, and your policy ends.

While Level Term Insurance is guaranteed, Decreasing Term Life Insurance decreases in cover over time.

Given that the outstanding balance of your mortgage decreases over time, it makes sense that the amount that you have it insured for decreases as well. Otherwise, you may be paying more than necessary for cover that you don’t need.

The type of Decreasing Life Insurance policy that you should look for will decrease in cover at the same rate as your mortgage’s interest rate.

This will ensure that your insurance policy’s payout will always cover the total cost of your mortgage debt.

Ciaran King, Independent protection expert at Drewberry

To find out more about this type of mortgage life insurance, you can read our guide on how Decreasing Term Life Insurance works.

Ciaran King
Independent Protection Expert at Drewberry

 

The Pros and Cons of Decreasing Mortgage Life Insurance

Pros
Cons

Cheaper than Level Term Mortgage Insurance

If your benefit decreases at a faster rate than your mortgage interest rate, you could be left with a shortfall when it’s time to claim.

Matches the value of your mortgage debt as it decreases

Typically covers only the mortgage and will not pay out more to cover other debts or expenses.

As long as you only need your Life Insurance for the mortgage, you don’t have to pay for excess cover.

There will not usually be much if any lump sum leftover after repaying the mortgage to use as your family sees fit.

When choosing between Level or Decreasing Term Mortgage Life Insurance, Decreasing Term policies are likely to be the less expensive option. This is because your level of cover decreases over time in line with the cost of your mortgage.

One issue that you may have with this type of mortgage protection policy is that it will not provide your loved ones with any financial support aside from paying off you mortgage.

If you miss any mortgage payments or your Life Insurance policy decreases at a rate that exceeds the interest rate of your mortgage, there is also a possibility that your policy’s payout won’t cover your mortgage debt in full.

 

Do I Need Decreasing Term Life Insurance?

If you have a capital/principal repayment mortgage, decreasing term life insurance would likely be the best mortgage protection product for you. It will provide you with the right amount of cover to pay off your mortgage and will fall over time to match your repayment mortgage.

Under the right circumstances, Decreasing Life Insurance can be the better, more cost effective option.

However, Decreasing Term Life Insurance isn’t the best option if you want to leave a lump sum behind over and above your outstanding mortgage. This is because a Decreasing Term policy won’t usually cover much more than your mortgage.

If you want to cover your mortgage as well as financially support your loved ones, you may need to look at other Life Insurance options, including Level Term Life Insurance, which provides a fixed payout at the end of your policy.

Back to Top

Excellent service at convenient times of the day specified by me. All product options were clearly outlined and I am very pleased.

Matthew Draper
11/07/2018
 

What is Level Term Mortgage Life Insurance

Level Term Mortgage Life Insurance is designed to pay out a fixed benefit, so it will pay out the same amount in year one of the policy as in the policy’s final year. As such, it’s typically used to cover interest-only mortgages, where the amount of capital you owe the mortgage lender doesn’t shrink over time.

 

How Does Level Term Life Insurance Work?

When you apply for Level Term Mortgage Life Insurance, the level of cover your policy offers will typically be set to be equal to your mortgage debt to ensure that your insurance will cover the entire cost of your mortgage. Similarly, the length of cover is also set to last as long as your mortgage loan.

If you were to pass away before you managed to pay off your mortgage, your loved ones would use the payout from your insurance policy to pay off your mortgage in full and avoid having to give up their home.

You can also use Level Term Insurance where you have a decreasing mortgage to cover but you want to leave a lump sum in excess of your outstanding mortgage balance if you died after the first few years of the policy.

Samantha Haffenden-Angear, Independent Protection Expert at Drewberry

When you take out your policy, you may also have the option to index-link your Level Term Life Insurance. An index-linked Life Insurance policy will increase in value over time along with the retail prices index, so you don’t have to worry about the amount you’re insured for being eroded by inflation.

This is particularly important where the lump sum remains fixed for such a long period, as would typically be the case of Level Term Life Insurance.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

 

Advantages and Disadvantages of Level Term Mortgage Life Insurance

Pros
Cons

Fixed cover for the life of the policy

More expensive as the amount stays fixed

A fixed benefit may leave an additional lump sum behind for your family after repaying the mortgage

If used for a decreasing mortgage, the amount you’ll receive above the mortgage balance in the first years of the policy will be vastly lower than that you’d receive in the last years

Possible to index-link your benefit so that it doesn’t get eroded by inflation

If you choose not to index-link your policy, the benefit could be worth less in real (i.e. in inflation-adjusted terms) when you come to claim

One of the most appealing aspects of a Level Term Mortgage Insurance policy is that your insurance coverage is guaranteed and won’t change. This means that you won’t be at risk of your insurance payout falling short of covering your debt.

While you can increase your protection by indexing your policy and choosing guaranteed premiums, these options can increase the cost of your Mortgage Insurance.

By increasing your Level Term Life Insurance cover, you have the benefit of providing your loved ones with additional financial support on top of covering your mortgage debt.

What’s left of your Life Insurance payout after paying off the mortgage can be put towards other financial burdens, like bills and everyday expenses.

However, the downside of a Level term Mortgage Life Insurance policy is that it can be more expensive than Decreasing Term Cover. This is because your level of cover stays the same even as your risk of claiming increases with age.

 

Do I Need Level Term Mortgage Life Insurance?

Level Term Mortgage Life Insurance is available for any type of mortgage but it’s usually used to cover interest-only mortgages. This is because interest only mortgages require you to pay off the loan interest regularly but outstanding capital remains fixed.

It is possible to take out Level Term Mortgage Insurance with to cover other types of mortgages, but it may not always be the most cost effective option.

For instance, if you’re only worried about covering a straightforward repayment mortgage and don’t want to leave anything extra behind for your family, Decreasing Term Life Insurance may be the better option. As the amount of Life Insurance cover falls over time, it’s generally cheaper than Level Life Insurance.

Back to Top

Compare Top 10 UK Insurers
  Takes approx. 60 seconds
 - 
Need help? 
Call us on 
 

Level or Decreasing Term Mortgage Life Insurance?

The choice that you make between Level and Decreasing Mortgage Term Insurance depends predominantly on the following factors:

  • The type of mortgage loan you have
  • What you want to protect with your insurance policy.
Victoria Slade, Independent Protection Expert at Drewberry

In addition to choosing whether you should apply for Level or Decreasing Term Mortgage Life Insurance, you will need to think about the different options these policies provide.

This can include the level of cover you want, how long you want your policy to last, and which add-ons you may want to include to provide added protection for yourself and your loved ones. For that reason, you may consider speaking to an insurance expert. We’ll help you tailor your policy to suit your circumstances and help you find the best value cover.

Victoria Slade
Independent Protection Expert at Drewberry

Back to Top

Need Help? Start Live Chat with our Experts  

Neil
Pensions Advice

Robert
Income Protection
 Speak to our expert financial advisers today to find out more about your Mortgage Life Insurance options.

Speak to Financial Advisers and Insurance Experts

There are a lot mores options to consider in addition to the type of Mortgage Life Insurance suits you best. This includes deciding whether you want to take out a Joint Mortgage Life Insurance policy or add Critical Illness Cover to your Mortgage Protection Insurance.

These are all questions that you can discuss with our expert financial advisers if you feel lost for answers. We take your personal circumstances into consideration before looking at policy options and help you find the one that suits you best and meets all of your requirements.

To find out whether you need Level or Decreasing Term Mortgage Life Insurance and to learn more about your protection options, contact our expert insurance advisers for Mortgage Protection Insurance advice.

Robert Harvey, Independent Protection Expert at Drewberry

Our financial advisers are available on brighton_number] if you want to learn more about your options. With the help of an insurance expert, you can secure a great value Life Insurance policy that gives you exactly what you need.

To get started on your Mortgage Life Insurance, use our Mortgage Insurance Calculator and get instant quotes online.

Robert Harvey
Independent Protection Expert at Drewberry

Back to Top

Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Level of Cover
per
month
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Frequently Asked Mortgage Protection Insurance Questions

 
I am currently arranging a mortgage with my partner and someone suggested taking out joint life insurance...
 
I have a joint mortgage with my wife and a friend suggested that I take out joint mortgage life assurance...
 
I am thinking of taking out joint life cover with my husband, does this plan payout twice or only once?...
 
I’m thinking of getting covered but I’m not sure if mortgage protection is worthwhile or not. What...
REVIEWS
EXCELLENT
4.93 / 5 Average
652 Reviews
Verified Buyer
Overall Rating
The whole process was a pleasure. Drewberry we're easy to deal with, polite, knowledgeable and helpful
Verified Buyer
Overall Rating
Very good, clear service would recommend to friends and family
Anon
Overall Rating
Sam Carr provided an efficient and professional service.
Verified Buyer
Overall Rating
Sam Carr provided a professional but enthusiastic service and helped make the whole process very straight forward. Goodness knows I have been through enough application forms recently. My insurance product was never going to be easy to find and I had been rejected on a number of other occasions through others ironically due to well managed common health conditions. I identified Drewberry in a last and disappointing trawl on th web to find someone that actually wanted to take on a difficult case like me. Some brokers wouldn't even consider me. When we applied for my first choice product Sam wasn't at all deterred by the long wait for my GP report or the final rejection that came back from the insurer, sadly I have become used to it. Within a day he had lined up the second choice and to my surprise he had hit the nail on the head and introduced me to the correct insurer and terms for my needs whilst nogotiating an excellent premium. I am extremely satisfied with what Sam has achieved for me and I would have no hesitation in recommending either him or Drewberry to friends, family and and business contacts. In the future, Drewberry will be my first point of contact. Many thanks!
Kym
Overall Rating
Tailored to my need and the staff gave very good service