Your home may be repossessed if you do not keep up repayments on your mortgage.

Should you fail to disclose or misrepresent a fact, then you risk the insurer only paying part of the claim, declining to pay all the claim and possibly declaring the policy invalid.

We charge a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £149 to £750 and this will be discussed and agreed with you at the earliest opportunity.

When you take out a mortgage, one of the most important questions is what would happen to the payments if you died. Life insurance could clear the debt and keep a roof over your family’s heads. There are two main types of term cover, and choosing between them depends on what you want the policy to do.

We covered the basics in our guide to life insurance for mortgage protection. This article looks at the decision most people face next.

What is decreasing term assurance?

With decreasing term cover, the amount the policy would pay out falls over time. It’s designed to roughly match a repayment mortgage, where the balance you owe goes down each year as you pay it off.

If you died during the term, the payout should be enough to clear what’s left of the mortgage, as long as the policy was set up correctly and the mortgage runs as expected.

Because the cover reduces over time, decreasing term is usually cheaper than level term for the same starting amount.

What is level term assurance?

With level term cover, the payout stays the same for the whole policy. If you took out £250,000 of cover for 25 years, it would pay £250,000 whether you died in year two or year twenty-four.

Level term is often used for:

• Interest only mortgages, where the full loan is still owed at the end of the term. Read our guide to interest-only mortgages for more on how these work.
• Family protection, where you want to leave money on top of clearing the mortgage, for example to cover childcare, school costs or living expenses.
• Part and part mortgages, where some of the loan is on repayment and some on interest only.

Side by side

• Decreasing term suits a repayment mortgage and is usually the lower cost option. The payout drops over time, so it may leave little or nothing extra for your family beyond clearing the debt.
• Level term suits interest only mortgages and wider family protection. It usually costs more, but the payout doesn’t shrink, and in the later years it could leave a significant sum after the mortgage is repaid.

Things to watch out for

Interest rates. Decreasing term policies reduce at a set rate. If your mortgage rate is higher than the rate built into the policy, the cover could fall faster than your mortgage balance. We check this when we arrange cover.

Changes to your mortgage. If you remortgage, borrow more or extend your term, your existing cover may no longer match. It’s worth reviewing your protection whenever your mortgage changes, which we covered in why reviewing your protection cover matters when remortgaging.

Term length. The policy should usually run at least as long as the mortgage. Our guide to choosing your mortgage term explains how the term affects your payments.

Writing the policy in trust. Placing a policy in trust could help the payout reach the right people more quickly, without waiting for probate. There may be inheritance tax implications, so speak to your accountant or solicitor about that side, as we don’t give tax advice.

Could you combine the two?

Yes. Some people take decreasing term to cover the mortgage and a separate level term policy for family protection. Others add critical illness cover, which pays out on diagnosis of a specified serious illness. Having a mix of policies could give you more flexibility than one large plan.

Life cover only pays out on death. If you want protection against being unable to work, income protection is worth considering too.

How we could help

We’ll look at your mortgage type, your family’s needs and your budget, then recommend the cover that fits. We compare policies from a wide range of insurers and aim to make sure your protection lines up with your mortgage from day one.

Find out more on our personal protection page, or get in touch to review your cover.

Frequently asked questions