Decreasing term life insurance is also commonly known as mortgage life insurance. This is because this certain type of life insurance is often used to cover the balance of mortgage repayments as you owe less at the end of your mortgage term and don't need the same amount of coverage. 🏠
If you want to know more about mortgage life insurance, you're in the right place! Keep reading to get the answers to all your questions. 🙌
What is decreasing term life insurance?
Decreasing term life insurance is a policy where the death benefit paid out decreases throughout your policy. This means your premiums also slowly decrease over your term. 📉
How do mortgage life insurance policies work?
When you buy mortgage life insurance, you choose a specific term (a period of time) in which you are insured. You pay your premiums that decrease on a monthly basis, and the amount that your policy pays out decreases at the same rate. By the end of your chosen term, the pay out decreases to zero.
With decreasing term life insurance, your term will normally last as long as your mortgage does. This is so your loved ones will be able to stay in the house in case you pass away before the mortgage gets paid off. ⚰️
Do you need a decreasing life insurance policy?
Getting a decreasing life insurance policy means that your mortgage is covered and paid for in the event of your death. This means that a surviving partner or other loved ones can still afford to live in the home after you die.
Of course, this can be an enormous help to some people, but to others, it could be unnecessary. You're not legally required to get any form of life insurance when getting a mortgage however, some mortgage lenders may have it as a requirement before you can proceed with your application. 📃
Mortgage protection insurance details
Mortgage insurance can act as a safety net in case things don't go according to plan, living a long and healthy life. Just like any other type of insurance, mortgage insurance exists to protect you if you become unwell or lose your job and can't make your mortgage payments. 🤕
Generally speaking, there are actually three different types of mortgage protection.
Mortgage payment protection insurance (MPPI) This will cover your loan repayments for a period of up to two years if you were to lose your job, have an accident or develop an illness that leaves you unable to work.
Income protection This will replace a portion of your income (up to 65%) if you become unable to work due to illness or an accident. There are many different add ons to income protection insurance, including coverage for if you're made redundant.
Critical illness cover This is a kind of coverage that pays out a lump sum in the event of you developing one of the specifically listed medical conditions. The main critical illnesses are cancer, strokes and heart attacks but make sure to read the policy details before taking out critical illness cover.
What's covered by a decreasing term life insurance policy
A decreasing term life insurance policy is perfect for those looking to help protect a repayment mortgage plan. Buying a house is most likely the largest purchase you will ever make, it's also something to be super proud of, so you'll naturally want to protect it in the case of your death.
Not only will decreasing term life insurance help protect your repayment mortgage, but it will also give you peace of mind that your family can continue living in your home if you pass away.
What's NOT covered by mortgage protection cover
Before you buy mortgage protection cover, it's important that you know it can't be used if you have an interest-only mortgage. This is simply due to the fact that an interest-only mortgage requires you to pay it back in full at the end of the term.
How much cover do you need?
Choosing how much cover and how many policies you need is simple with decreasing term insurance. You need to factor in how much your mortgage is currently worth and how much interest you're paying. You'll also have to make sure that the cover amount doesn't fall at a faster rate than your outstanding mortgage.
At Bequest, our decreasing cover decreases at a rate of 8%.
Reasons to get a decreasing term life insurance policy
Due to the structure of a decreasing life insurance policy, it's normally cheaper as the amount that life insurance providers have to pay out gets lower over time. It's a cheaper option than level term life insurance where your premiums and pay out amount stay the same throughout the length of your term.
Having a decreasing term life insurance policy also means your family will be able to process with their loss and grief without worrying about covering the cost of their home. It's peace of mind for you and your loved ones. 👪
Get a quote for mortgage life insurance cover now
Is there life insurance that pays off your mortgage?
Most types of life insurance such as level term life insurance and whole of life can be used to pay off your mortgage, it's a common use of a life insurance pay out. However, decreasing term life insurance is perfect if you're looking to just cover your mortgage and ensure that your family are able to stay in their home after you pass.
Is mortgage life insurance the same as life insurance?
Mortgage life insurance is a type of life insurance. It's a way of covering your outstanding mortgage if you pass away during your life insurance term.
What exactly does mortgage insurance cover?
Mortgage insurance, also known as decreasing term life insurance, is specifically designed to cover your mortgage if you die before you pay it off. It covers your outstanding mortgage amount. ☂️
Does a mortgage life insurance policy include critical illness cover?
In short, no. Critical illness cover is a different type of insurance that pays out a lump sum if you develop a specific listed medical condition. It often covers conditions like cancer, strokes and heart attacks.
Be sure to read the fine print before taking out critical illness cover. 📃
Is mortgage insurance a waste of money?
Decreasing term insurance is usually best for people who want to cover the rest of their mortgage if they pass away before paying it off. Decreasing term life insurance isn't suitable for if you have an interest-only mortgage or want to leave significant financial support to your beneficiaries. For this, level term or whole of life cover is best.
What is the cost for mortgage protection insurance?
The cost of mortgage protection insurance is completely dependent on each person's situation. It depends on how much cover you need, how long for and the rate at which it decreases.
What does decreasing mean in life insurance?
Decreasing term is a type of life insurance where the amount you pay in premiums decreases throughout your term, as does your pay out. It's the perfect way to cover your outstanding mortgage when you die.
What happens at end of decreasing life insurance?
At the end of decreasing term life insurance, you stop paying your premiums and your pay out equates to zero and. You no longer need a decreasing term policy as you would have also reached the end of your repayment mortgage. 🙌
What is the difference between level life insurance and decreasing life insurance?
With a level policy, your premiums stay the same throughout a fixed period of time and your pay out is a fixed amount. Whereas decreasing life insurance involves premiums decreasing in price until either you pass away or you have paid off your mortgage.
Can life insurance premiums decrease?
With decreasing term life insurance, your premiums decrease with each payment. The reason for this is to make the pay out the same level as your remaining mortgage. Either level or whole of life, they do not decrease automatically - it would be only be if you are looking to get less coverage.
Why would you get decreasing term life insurance?
You would get a decreasing term life insurance policy if you wanted to pay off your mortgage if you haven't already before you die. The main reason for this is to give your loved ones peace of mind that they can stay in their home when you pass away.
Is decreasing term life insurance cheaper?
Decreasing term life insurance is known to be a cheaper cover option. This is simply because the amount you pay in premiums decreases each month so your pay out matches the outstanding mortgage balance.
What is the difference between mortgage protection and life insurance?
There are three different types or mortgage protection, they are mortgage payment protection, income protection and critical illness cover. These are forms of cover that will aid you financially while you are still alive to cover your mortgage repayments if you are unable to work. Whereas life insurance only pays out when you die (some allow you to receive the payout within 12 months of your passing) and is to support loved ones financially during a time of grief.