Do I need level or decreasing term insurance?

Understandably, life insurance is something that nobody likes to think about. However, if you have debts such as a mortgage, it’s important you have the appropriate cover. Worryingly, many people who take on debts do not have the relevant protection in place.

There are several types of life insurance available to you, but one key difference is between Level Term Insurance and Decreasing Term Insurance.

Level Term Insurance

With level term insurance, the level of cover will remain the same for the duration of the policy term. If your death falls within this term, the sum assured will be paid to your family. You can choose the length of your cover at the outset, in addition to the amount you wish to be insured for. Generally, your premiums will remain the same throughout.

If you have an interest only repayment structure for your mortgage, level term insurance may be appropriate as you know you will have a large capital debt to pay out at the end of your mortgage term.

Decreasing Term Insurance

Decreasing term insurance will gradually decrease over the term of your policy. This sort of cover can be appropriate if you know you have a debt such as your repayment mortgage, which will need paying off in the event of your death. Covering your mortgage in this way means your family can remain in your home, without the stressful burden of large monthly mortgage repayments. Your premiums will  generally decrease throughout the life of your policy.

This may be appealing for those who know they are likely to need less cover in the future than they do now. If you have young children, you may want to make sure they are protected to a greater extent in the short-term. In fifteen years’ time, your children may no longer be dependent, so you will require a smaller sum assured.

Which should I choose?

Ultimately, your choice will depend on your priorities. If your mortgage is a decreasing debt, because you are paying back on a capital and repayment basis, decreasing term insurance could save you money. However, level term insurance may give you security and consistency.

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