Decreasing Term Assurance
What does decreasing life term assurance cover?
Decreasing term life assurance provides a lump sum (a specified amount of money i.e. £100,000 at policy inception or start of the term, reducing to £0 by the end of the term) in the event of the life insureds death during the term.
It’s called decreasing term assurance as the amount of the lump sum decreases in line with a specified percentage reduction on each policy anniversary.
The term is the period of time the policy is in force.
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Why is Decreasing Life Term Assurance cover useful?
Decreasing Term Life Assurance is often used to cover the balance of a repayment mortgage, as the total balance of the mortgage will decrease over time and will be paid off in full at the end of the mortgage term. This is also useful as the monthly premiums are often lower than other types of life cover. This also provides your family with the financial security should the insured/policy holder die unexpectedly.
What term can Decreasing Life Term Assurance cover be taken for?
It’s usually best to choose a term that lasts for as long you have left on your mortgage or other outstanding debt. For example, if your mortgage lasts 25 years, make sure you choose the same for your insurance cover.
Decreasing Term Life Assurance will usually allow a policy to be as long as 40 years but must end before a certain age, e.g. 65 years. This will vary depending on insurance provider so it’s best to check the policy details first or speak to a regulated and qualified adviser to see which policy is most appropriate for you.
Can I claim on Decreasing Life Term Assurance cover before I die?
Depending on the insurer, some policies will allow you to claim on your cover if you’ve been diagnosed with a terminal illness in which you have been told you’re expected to die within 12 months.
THESE PLANS TYPICALLY HAVE NO CASH IN VALUE AT ANYTIME AND COVER WILL CEASE AT THE END OF THE TERM. IF PREMIUMS CEASE, THEN COVER WILL LAPSE.
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