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Decreasing Life Insurance
This is a life insurance where your cover lasts for a pre-agreed period but unlike Level Life Insurance the amount of cover gradually decreases each year because it is designed to be used with a repayment mortgage where the outstanding loan also decreases over time. Decreasing Life Insurance is commonly referred to Mortgage Protection Insurance.
Usually, the cover term matches the length of your mortgage, and pays out if you were to die during that time. Decreasing term insurance pays out a tax-free lump sum if you were to die during the term of cover.
Decreasing Term Insurance is best suited for people with repayment mortgages. The pay-out is typically used for mortgage debt redemption.
Largely because the cover amount decreases over the term to zero by the end of the term assuming no claim, this makes Decreasing Term Insurance cheaper than a Level Term insurance. This cover is fairly simple and affordable.