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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