Decreasing term mortgage protection life insurance is usually used to cover a repayment mortgage.
The value of the sum assured goes down over the term of the policy.
So, decreasing term cover is the best way to protect a repayment mortgage, since the amount you’re covered for can be set to go down along with your mortgage.
Level term life insurance is usually used to cover an interest only mortgage.
With an interest-only mortgage, the outstanding loan balance remains constant over time because only the interest is being paid.
As the level of debt remains constant over time, so should the amount of life insurance coverage. Level term insurance pays out a lump sum which would pay off your interest only mortgage in full.
With level term insurance, the amount of coverage remains constant throughout time, making it the policy of choice for an interest-only mortgage.
The cost of life insurance can differ greatly amongst insurers. This means that the coverage provided by your lender is unlikely to be the most cost-effective choice.
It’s always a good idea to compare quotes to ensure you get full protection at the best price.
It is not required to get life insurance through your mortgage provider, though it is likely that they will encourage you to do so because they will earn a commission.
Cover your mortgage today from as little as 30p a day.