What is the difference between ‘level term’ and ‘decreasing term’ life insurance?
With level term life insurance, the amount of cover stays the same throughout your policy’s term. A lump sum will be paid out to your loved ones if you die within the agreed term. This sum will help to cover expenses such as household bills and funeral costs.
Decreasing term life insurance, on the other hand, is taken out by people with a repayment mortgage. Any of your other expenses are not covered as a part of the policy, and the lump sum paid out reduces over time in line with your mortgage balance.
Check out our blog on level term vs decreasing term life insurance on the difference between the two.
Should I take out decreasing term life insurance if I have a mortgage?
Although taking out decreasing term insurance is a choice, many mortgage providers will insist that you take out a life insurance policy with your mortgage.
And if you have people who depend on you to pay the mortgage, having life insurance is a sensible option. If you die unexpectedly without insurance, this could cause a great deal of stress for your loved ones. They may have no choice but to leave your family home if they cannot afford to repay the mortgage.
Can I add critical illness cover to my decreasing term life policy?
For an additional cost, critical illness cover can be added to your decreasing term policy.
With critical illness cover, your dependents could receive a cash sum if you are diagnosed with an illness or serious health condition that is specified in your policy documents. This can include a heart attack, a stroke, and several types of cancer.
What other types of cover should I consider?
Depending on your circumstances, a level term life insurance policy may suit your needs better. A level term policy stays fixed throughout the course of the agreement. This means that your family will receive a lump sum payment if you die during the policy’s term.
A level term life insurance policy may help them to pay for expenses that are notlimited to mortgage repayments. Instead, this may also include funeral costs or childcare. However, this type of cover tends to be pricier than decreasing term life insurance.
Another option: if you are married or in a long-term relationship, you may wish to consider joint life insurance. Joint life insurance covers two people. It ensures that you and your partner will be financially protected when one of you passes away.