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The name for the product may seem confusing – what is decreasing? What does the term refer to? We’ve broken everything down so you can understand decreasing term life insurance.
Decreasing term life insurance is designed to help your loved ones pay off your financial commitments if you pass away during the policy term. These might be a repayment mortgage, loans or credit card balances.
The amount of cover paid out goes down each year for the length of the policy, eventually finishing at £0. This is usually in line with an outstanding debt you want to pay off.
What you pay stays the same for the duration. The cover amount will eventually finish at £0, just like any debt commitment that you want to pay off.
All of this means you won’t leave your family with bills and debts if you pass away during the term of the policy.
The interest rate on your mortgage will also affect your insurance. Most providers cap their decreasing term life insurance cover between 6% and 8%. This means if your mortgage has an interest rate higher than this your insurance may not clear your total debt. At Post Office, we cap our decreasing term cover at 8%.
One reason people get decreasing term life insurance is to cover a repayment mortgage. Policies are usually designed to stay in line with your repayment commitments. As you pay it off, you need less from your payout. The same applies for other types of repayment debts.
Decreasing term policies tend to have the lowest premiums of the three main types of term life cover. This type of policy is an option if you want to invest in life cover but need to keep your monthly premiums to a minimum.
All of this helps your loved ones avoid financial stress if you were to die during your policy term.
With decreasing term life insurance, you only pay for the cover you need.
The price of these policies means they’re an affordable option for making sure your children aren’t saddled with your outstanding debts.
As they get older, they’re likely to be less financially dependent on you, so the need for you to leave them a legacy may not be so great. Decreasing cover may suit for this reason too.
Here's a quick summary of how the decreasing cover option works on Post Office Life Insurance.
Yes (for an additional cost)
About critical illness and children’s cover
To make sure you’ve the right amount of cover for your needs, consider the following three questions.
What do you need to protect?
How much cover do you need?
How long do you need the cover for?
Think about whether you have a mortgage, other outstanding debts, or a combination of these. If you have a repayment mortgage, consider how much is outstanding. How long until it’s paid off?
Our life insurance calculator is an easy way to estimate how much cover you may need in your current situation. Simply enter a few details into the calculator to start.
Consider what the primary use of an insurance pay-out would be. If you want to leave a cash lump sum for a significant other or children, level or increasing term policies might be most suitable. They may leave a substantial sum of money, but the premiums may also be higher. If you’re in a financially sound situation and don’t have any more debts, level and increasing term policies which pay a cash lump sum may be more appropriate for you.
With level term life cover, your dependents will get the same amount no matter when they need to claim. But this doesn’t adjust for inflation so, if you have a long-term policy, the same amount of cover may seem worthless over time because of the increasing cost of living.
Increasing term cover does consider the rising cost of living (inflation). The payout value increases over time, but your premiums also increase – often higher than those of level and decreasing cover (for the same individual). You might want to consider this type of policy if you want your payout to retain its same real-terms value.
It’s quick and easy to get a quote for Post Office Life Insurance online.
Monday to Friday: 9am - 8pm
Saturday: 9am - 5pm
Closed on Sundays and bank holidays
As with every type of insurance, it’s important to make sure you understand all the specific terms of a policy. To make sure you’re going to be covered appropriately, it’s advisable to seek advice from an independent financial advisor.
Make sure you qualify for the insurance you want. For example, many policies won’t cover soldiers and people whose lives involve a high level of risk. If you’re a smoker, it’s likely your premiums will be higher.
Answer all questions honestly to make sure your policy isn’t invalidated later.
Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.
If you're aged between 50 and 80, we could help you leave a cash sum for your family or towards your funeral costs.
To make a claim, find answers to common questions, access bereavement and wellbeing support or contact us for something else:
Visit our Life Cover support page
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*0330 & 0345: Calls to 03 numbers will cost no more than calling a standard UK number starting with 01 or 02 from your fixed line or mobile and may be included in your call package. Calls may be monitored or recorded for training and compliance purposes.
^ Your cash sum is dependent on your age, smoker status, length and type of cover and your personal circumstances at the time you apply.
Post Office Life Insurance offers up to £750,000 cover, depending on your age, for customers who are UK residents aged 18-70 at the start of the policy. The minimum term is 5 years and cover must end before your 90th birthday.
We won’t pay a claim on death if it was as a result of suicide or intentional self-inflicted injury within 12 months of the start date of your policy.
Critical Illness Cover can pay an extra cash sum if you’re diagnosed, during the term of your policy, with one of the four critical illnesses covered that meets our definition.
We won’t pay a claim on terminal illness if you don’t meet our definition of terminal illness; or terminal illness is caused by intentional self-inflicted injury within 12 months of the start date of your policy. The full definition of terminal illness can be found in the terms and conditions.
We won’t pay a claim if you don’t keep your payments up to date as you will no longer be covered under the policy. If you don’t tell us something or give us incorrect answers to our application questions that affects your cover, we may reduce the amount we pay for a claim or at worst cancel your cover and not refund your monthly payments. If you’re a UK resident aged between 18 and 70, you can apply for cover. Please see terms and conditions for further details about the restrictions that apply.
Post Office Life Insurance is underwritten and administered by Scottish Friendly Assurance Society Limited. Neilson Financial Services Limited assist in the administration.