Fixed term versus decreasing term life insurance – what’s the difference?
Purchasing a life insurance policy is a way to gain peace of mind that your family will be taken care of if you pass away unexpectedly. Life cover can be used to cover bills, pay the mortgage and provide security for your partner or any dependants you have.
When it comes to life insurance, one size doesn’t fit all, and today there are dozens of different brokers and policies that you can choose from to find the one that suits you. Policies can be paid out in a lump sum or as a regular income, you can choose different payment terms and cover amounts, and even get special illness cover. Two of the most popular types are known as fixed term and decreasing term, and many of the policies you come across will be one of the two.
With so much choice though, it’s important to understand exactly what each policy offers and what the differences are between each so that you are choosing the right cover and that it can actually be of benefit to your family in the event you pass away.
Fixed term life insurance is a standard policy, and is very popular because it’s straightforward and easy to understand. When you take out a fixed term insurance policy you choose how much cover you want and how long you want the cover to last, typically a period between 10 – 25 years. If the policyholder dies unexpectedly while the policy is still in term, it will pay out, if the policy holder lives beyond the term then the policy will pay nothing.
Many people choose fixed term insurance policies because of their simplicity. If you know you will have dependants – for example, children – who rely on your income then you may choose to take a policy that lasts only as long as you intend to work or that they will be living with you.
If you’re interested in a fixed term policy, you can compare prices and get quotes online from comparison websites like Moneysupermarket and Compare the Market, or go directly through a broker like the Post Office or Direct Line.
Decreasing term life insurance policies work a little differently. Designed as a more affordable option, decreasing term policies – also known as mortgage life policies – work by paying out a smaller sum over time. Most people buy a decreasing term policy to coincide with a loan or a mortgage, where the sum paid out will be roughly equivalent to the value of the debt. The amount of cover decreases slowly over time in line with whatever your outstanding debt is.
Though decreased term life insurance policies may seem more complicated, they are often easier and more affordable if you’re looking for peace of mind but don’t necessarily want to pay into an expensive policy each month. Premiums are typically guaranteed at the beginning of the policy so the price won’t change and you’ll get the cover you need to ensure you never leave any debts behind.
The contents of this article are for reference purposes only and do not constitute financial or legal advice. Independent financial or legal advice should be sought in relation to any specific matter. Articles are published by us without any knowledge or notice of the circumstances in which you or anyone else may use or rely on articles or any copy of the information, guidance or documents obtained from articles. We operate and publish articles without undertaking or accepting any duty of care or responsibility for articles or their contents, services or facilities. You undertake to rely on them entirely at your own risk, and without recourse to us. No assurance of the quality of articles is given or undertaken (whether as to accuracy, completeness, fitness for any purpose, conformance to any description or sample, or otherwise), or as to the timeliness of the publication.
Latest posts by Webmaster (see all)
- Fixed term versus decreasing term life insurance – what’s the difference? - June 29, 2014
- Garden on the go with the best gardening apps - June 29, 2014
Leave a Comment!
Community Terms & Conditions
These content standards apply to any and all material which you contribute to our site (contributions), and to any interactive services associated with it.
You must comply with the spirit of the following standards as well as the letter. The standards apply to each part of any contribution as well as to its whole.
be accurate (where they state facts); be genuinely held (where they state opinions); and comply with applicable law in the UK and in any country from which they are posted.
Contributions must not:
contain any material which is defamatory of any person; or contain any material which is obscene, offensive, hateful or inflammatory; or promote sexually explicit material; or promote violence; promote discrimination based on race, sex, religion, nationality, disability, sexual orientation or age; or infringe any copyright, database right or trade mark of any other person; or be likely to deceive any person; or be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence; or promote any illegal activity; or be threatening, abuse or invade another’s privacy, or cause annoyance, inconvenience or needless anxiety; or be likely to harass, upset, embarrass, alarm or annoy any other person; or be used to impersonate any person, or to misrepresent your identity or affiliation with any person; or give the impression that they emanate from us, if this is not the case; or advocate, promote or assist any unlawful act such as (by way of example only) copyright infringement or computer misuse.
Nurturing a safe environment
Our Silversurfers community is designed to foster friendships, based on trust, honesty, integrity and loyalty and is underpinned by these values.
We don't tolerate swearing, and reserve the right to remove any posts which we feel may offend others... let's keep it friendly!