Large debts, such as a mortgage, are one of the key factors that influence many families to seek life insurance cover. If you (or your partner) were to suddenly pass away, how would you ensure that your mortgage payments, and other debts, are taken care of?
Read on to find out how Decreasing Term Life Insurance Works and how it can help protect your family.
One of the more popular life insurance products is Term Life Insurance Cover. These policies can run for 10, 20 years or more. You choose the length of time you are insured and the sum of money you would like assured as a payout. A decreasing term life insurance policy works like a term life insurance policy, only the sum insured will reduce over the length of the insurance term. The reductions may reduce on a monthly or annual basis, depending on the provider.
These products are designed specifically to work in alignment with a mortgage loan. Over the length of a repayment mortgage term, the amount you owe will steadily decrease. This means if you were to die during the length of your mortgage term, a decreasing term life insurance policy will cover only the amount that remains on your mortgage payment. Therefore, it is worth noting that this type of insurance is not designed to offer your will beneficiaries a lump sum to enjoy. The payout will go straight to your mortgage lenders to cover your debts.
As these products run for a set term, in most cases, once the term of your policy has concluded, your loved ones will receive no funds if you were to die. However, they will have the mortgage of your property taken care of.
Please Note: Decreasing Term Life Insurance policies are more suitable for repayment mortgages, rather than interest only plans. This is because the bulk of the repayment funds need to be available towards the end of the mortgage term. And with this type of life cover, the sum assured decreases over time.
Theo and Cara have just taken out a £240,000 mortgage and are looking for a way to protect their payments in the event of one (or both) of them die.
The mortgage term is 25 years and they are looking to cover themselves with life insurance for that term. As they are a young couple (26 and 27 years old), just starting out, they look at decreasing mortgage insurance.
After 23 years, the couple have paid off most of their repayment mortgage, their payout would be expected to cover just £10,000 left on their mortgage.
If you would like to speak to an independent life insurance broker about decreasing term life insurance, get in touch. They can offer you free advice and a no-obligation life insurance policy quote.
I needed life insurance and critical illness for myself and my wife. I got a number of quotes from some of the big brands and was very happy with the final price. Mike Davidson, Birmingham
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* Life insurance from 20p per day is an illustrative figure only and may not be available to you. The figure is based off of a 25 year old non smoking female taking out £150,000 of term assurance over 25 years on a level term basis and available from Beagle Street. Figure accurate as of 19/03/2015.
* Life insurance & Critical Illness from 35p per day is an illustrative figure only and may not be available to you. The figure is based off of a 25 year old non smoking female taking out £150,000 of term assurance over 25 years on a level term basis along with £50,000 of critical illness cover and is available from Beagle Street. Figure accurate as of 19/08/2015.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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