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Life Insurance with Critical Illness

What's the difference between level and decreasing life cover?

Answer

Level cover provides the same amount of cover throughout the term of the policy, depending on how it was set the start. For example, if you chose £100,000 over 20 years and died in the last year, you'd get the full £100,000.

Decreasing cover reduces over the term of the policy and is usually cheaper than the level cover. Some decreasing cover policies reduce in specific amounts, for example, to match a mortgage or to cover an inheritance tax liability. Other types include providing a regular payment every 3 months after death until the end of the term.

Your choice should depend on how much money you'll need and when. For example, a level term policy would overpay a capital and interest mortgage leaving you overinsured. Although you could do this, you'd be paying more than you need to.

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