How to cover your mortgage in the event of your death?
Decreasing life insurance ensures that if you die, your loved ones won’t have to face the stress of paying off your outstanding debts or even having to move home at an already difficult time.
Decreasing life insurance is no use if you have an Interest only mortgage. For instance, on a buy-to-let property. Interest-only mortgages require you to pay back the full sum at the end of the term, and they’re unlikely to be covered by a decreasing life insurance policy.
Whether or not a decreasing life insurance policy is right for you will depend on your situation and your priorities.
Some good reasons to get a decreasing term policy include:
- The price: Decreasing life insurance is often much cheaper than level-term. It could be right for you if you’re on a tight budget but still want to protect your loved ones from financial problems if you pass away.
- To protect your mortgage: If you don’t have any dependents, a decreasing policy can still protect your mortgage and some lenders will insist you have some kind of life insurance before they offer you one.
However, decreasing life insurance also has some drawbacks. These include:
- Decreasing value: The amount your policy pays out will decrease with time. This means that if you’re towards the end of your term, you’ll still be paying the same premiums but for much less reward.
- No maturity value: Because the value of your policy steadily falls to zero, if you survive past the end of the term there’s no chance of a payout when it matures.
I am an Independent Financial and Mortgage Adviser and have worked in Financial Services for over 12 years. During my career I gained experience in assisting both individual and corporate clients.…