Decreasing Term Life Insurance
Decreasing term life insurance, or decreasing term assurance as it is sometimes known, is a popular choice of life insurance among those with a repayment mortgage. This is cheaper than level term assurance as the amount paid out reduces each year as your remaining mortgage decreases. This means that in the event of the policy holder dying at the end of the term of the mortgage no money will be paid out. It is therefore not a sensible option for those looking to invest their money as there is no maturity on the sum paid out.
Choosing a decreasing term life insurance however can offer peace of mind that your beneficiaries will not be faced with the burden of mortgage repayments or risk losing their inheritance.
Level Term Life Insurance
Level term life insurance, or level term assurance, is a life cover product that offers more money to the policy holder's beneficiaries. Money is paid out in the event of the policy holder's death but as a set lump sum that does not decrease as the mortgage repayments reduce. This means that your beneficiaries benefit not only from being free of the burden of mortgage repayments but will also receive extra money.
This is a more expensive option than decreasing term life insurance, to take into account the extra money beneficiaries receive. However as with decreasing term life insurance the money is only paid out during the term of the mortgage and in the event of the policy holder's death. It is therefore not a sensible option for those looking to purchase a life insurance or mortgage protection policy as an investment.
Increasing Term Life Insurance
Worried about rising inflation? If so increasing term life insurance could be the policy for you. As with decreasing term life insurance and level term life insurance the money is only paid out in the event of the policyholder's death. However the key difference is that each year the potential sum paid out increases by a small amount. The increase in this form of term life insurance can either be by a certain amount each year or a percentage of the mortgage. This is a more expensive option than either decreasing term life insurance or level term life insurance and often insurers ask for further evidence of good health before offering this type of life insurance.
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