It is a life insurance policy that offers a reducing payout over its term. It can be used as a type of mortgage life insurance, with the payout reducing as your mortgage is repaid each month.

How does decreasing life cover work?

You choose a payout amount when you take out your policy, and the amount reduces each month until the policy ends.

This type of life insurance can be taken out to run alongside any large amounts of debt you may have, e.g. your mortgage.

What cover do you need?

Before you get quotes online, find out:

  • How much your mortgage is worth: This will give you a payout figure to use when you get quotes.

  • What interest rate you pay on your mortgage: A decreasing life policy reduces its payout based on a set monthly percentage. Look for a policy that has the same interest or higher so you have the cover you need.

What else to consider

Finding the best policy is not only about getting the cheapest price for the payout and term you want. When you get quotes, think about:

  • What causes of death you want cover for: Most insurers cover strokes and certain types of cancer, but they do not cover all causes of death. Check policy documents for a list of conditions covered, and any exclusions.

  • If you want a policy with reviewable cover: Some insurers let you review and adjust your cover after a set term, like 15 years. If you no longer need as much cover, you could end up paying less, but if your health has worsened it could cost you more.

Why choose decreasing term life insurance?

A decreasing term life insurance policy is usually cheaper than a level term or whole of life policy, but the payout reduces each month.

Decreasing life insurance is usually taken out alongside a mortgage. This is because the payout reduces each month, similar to your mortgage balance after repayments.

This differs to level term life insurance, which will pay out a fixed amount if you die during the term, but costs you more in monthly premiums.