A guide to decreasing term life insurance

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.

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What is decreasing term life insurance?

Decreasing term life cover is designed to help your loved ones pay off your financial commitments such as a repayment mortgage, loans or credit card balances if you pass away during the term of the policy. 

The idea is that 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 - meaning you won’t leave your family with the bill if you pass away within the policy period.

What you pay stays exactly the same for the duration. The cover amount will eventually finish at £0, just like any debt commitment that you want to pay off - meaning you won’t leave your family with 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%, meaning that if your mortgage has an interest rate higher than this, then your insurance may not clear your total debt. Post Office Decreasing Term Cover is capped at 7%.

Why should I get decreasing term life insurance?

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, so as you pay it off, you require less from your pay-out.

The same applies for other types of repayment debts. Decreasing term policies tend to have the lowest premiums of the three main term cover options, which makes this type of policy an option for people who want to invest in life cover, but need to keep their monthly premiums to a minimum.

All of this helps your loved ones to mitigate for financial stress if you were to die during your policy term.

Are there other benefits to a decreasing term policy?

With a decreasing term policy, you are only paying for cover you need, such as the outstanding debt you have. As your children get older, it’s likely that they will be less financially dependent on you and the need for you to leave them a legacy not so great.

Due to their price, decreasing term policies are an affordable option for those wishing to make sure that they’re children aren’t saddled with their debt.

Post Office Decreasing Term Life Insurance

What's it for? Typically used to pay off a debt like a repayment mortgage, loans or credit cards if you die as long as the interest rate isn't more than 7%.
Fixed cash sum pay-out? No, the pay-out amount reduces over the length of the policy in line with your outstanding personal debts
What's the maximum pay-out? Up to £500,000
Age limit Ages 18-70
Is terminal illness cover included?
  •  
Are health-related question asked?
  •  
Can I add Critical Illness Cover to my policy?
  • (additional cost will be applicable)
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What is the right amount of cover for me?

In order to ensure you have the right amount of cover for your needs, you will need to 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?


You’ll need to think about whether you have a mortgage or other outstanding debts, or even a combination of these. If you have a repayment mortgage, you will need to consider how much is outstanding and how long it will be until it is 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.

What about level and increasing term policies?

Consider what the primary use of an insurance pay-out would be. If you want to leave a cash lump sum behind for a significant other or children, then level or increasing term policies might be most suitable for you. These options may leave a substantial sum of money, but the premiums may also be higher.

If you are in a financially sound situation and do not have any more debts, then level and increasing term policies which pay a cash lump sum may be more appropriate for you.

Important considerations

As with every type of insurance, it’s important to make sure you understand all of the specific terms of a policy. To make sure that you are going to be covered appropriately, it’s advisable to seek advice from an independent financial advisor.

Make sure that you qualify for the insurance you want. For example, many policies will not cover soldiers and people whose lives involve a high level of risk. If you are a smoker, it is likely that your premiums will be higher.

Answer all questions honestly in order that your policy is not later invalidated.

Protect what matters to you, like your loved ones and lifestyle, in case the unexpected happens.

More ways to get covered

Life Insurance

Our Term Life Insurance comes with Terminal Illness Benefit as standard. We have three types of cover to suit your lifestyle.

Life Insurance

Over 50s Life Insurance

Our Over 50s Life Insurance offers you whole-of-life cover so you can leave your loved ones the gift of peace of mind whether you want to help relieve them of the costs of your funeral or leave them a financial security blanket.

Over 50s Life Insurance

Critical Illness Cover

Get extra protection and financial peace of mind by adding the optional Critical Illness Cover to your Post Office Money Life Insurance.

Critical Illness Cover

Free Parent Life Cover

If you have children aged under four years old, you could get £15,000 of life cover free for a year.

Free Parent Life Cover

Still have questions?

You can find more life insurance articles at Post Office My Family.

Things you need to know

Monthly payments depend on the amount, length, type of cover and your personal circumstances.

Post Office Money Life Insurance is provided by The Royal London Mutual Insurance Society Limited. 

Post Office Money Life Insurance offers up to £500,000 cover 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 81st 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 Benefit can pay an extra cash sum if you are diagnosed, during the term of your policy, with one of the three critical illnesses covered that meets our definition  and then survive for at least 10 days after. 

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, excluding members of the Armed Forces, Army Reserve (previously known as the TA) or Reservists, you can apply. Please see Terms and Conditions for further details about the restrictions that apply.