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They tend to be cheaper than other policies: This is due to the fact that your payout amount drops over time. With more expensive policies, like level term ones, your payout stays the same no matter how far into your cover term you die.
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They ensure your mortgage is covered: This gives you peace of mind that your family can keep your home even if you pass away before your mortgage is paid off.
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They can be taken out as joint policies: Joint life insurance policies can cover you and someone you have a mortgage with. This means that if either of you pass away, the mortgage is paid in full.
Getting the right decreasing term policy
If you’re taking out a decreasing term policy to cover a mortgage, you’d usually:
What our life insurance expert says
Pros and cons of decreasing term policies
How much is decreasing term life insurance?
Average cost of a decreasing term policy*:
£19 a month
*Based on Confused.com data June - August 2023. Prices based on average quote offered on a 25-year decreasing term policy with £100,000 of cover.
The average cost of a decreasing term life insurance policy is £19 a month*.
Exactly what you pay for your policy is based on a range of factors that are unique to you. This means that the price is different for everyone.
When calculating the cost of your life insurance policy, insurers will look at lifestyle factors like how much you drink, smoke and weigh, as well as what job you do.
They'll also look at more general factors that are largely out of your control like your family medical history and your age.
Generally though, the younger and healthier you are, the less you’ll pay.
*Based on Confused.com data June - August 2023. Prices based on average quote offered on a 25-year decreasing term policy with £100,000 of cover.
What are the different types of life insurance?
Will my benefactors have to pay tax on the money they get?
Whether your beneficiaries have to pay inheritance tax on your policy payout depends on a number of factors:
- If the total value of your estate is less than £325,000, your inheritors won’t have to pay tax on anything you leave them.
- If it’s above this threshold, they’ll pay 40% tax on everything above that limit.
- If your payout is used to clear a mortgage, and the house your beneficiaries inherit is valued above £325,000, then your beneficiaries will pay tax.
There are exceptions to this, though. If you leave your estate to a spouse or civil partner, they won’t pay any tax.
The same goes if you leave your estate to a charity or community amateur sports club.
You can also write your policy in trust. This allows you to name exactly who your policy goes to, and means the recipient won’t pay tax on it.
What happens if I pay off my mortgage before the policy ends?
If you pay off your mortgage early, you have two options:
Need more help with decreasing term life insurance?
What happens if I stop paying my premiums
If you miss a payment, you’ll usually be given a grace period in which to pay. This is typically around 60 days.
After this period, your policy may be terminated. This would see your cover end, and would mean that any premiums you’d already paid into your policy would be lost. You wouldn’t get them back as a refund.
The only situation in which you’re likely to get any kind of refund is if you pay for your policy annually, and terminate your cover part way through the year. You may then get a pro-rata refund for the remaining months you hadn’t yet been covered for.
Does my policy's payout have to be used to cover a mortgage?
No, your payout can be used however your beneficiaries see fit. If paying off the mortgage you leave behind isn’t a priority for them, the money could be used to support them in your absence, to act as an inheritance or for something else entirely.