What is Life Insurance Decreasing Cover?
This type of policy is often purchased when a specific debt needs to be cleared which is reducing over time. A term life insurance decreasing policy will
pay out if the borrower, or his or her partner, passes away.
It is also commonly known as mortgage decreasing term insurance as it is often used by homeowners who want to ensure their mortgage will be paid off should
they die. Many mortgage lenders will not agree to a mortgage if the buyer does not have or take out a life insurance policy, as this provides them
with a safety net as well as your family.
However, not all decreasing term life insurance policies are taken out for the sole purpose of covering mortgages. Another common reason is that people
aren’t always happy with the terms of other policies. For example, some feel like such a large payout should they die in 20 years isn’t necessary and
would prefer it to cover 10 years, in order to save money on premiums.
It is worth noting that a decreasing life insurance policy is not appropriate for interest-only mortgages due to the capital debt that gets repaid at the
end of the mortgage term.