How do i know if i need level, decreasing or increasing life insurance?

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It can be daunting when faced with the above question. What does each term mean? Which has the most comprehensive cover? Which one costs the most?

Don’t be confused by the above terms whilst looking at insurance comparison websites or after a conversation with your financial adviser, make sure you have the correct insurance in place.

Only YOU know what your want from your insurance policy and therefore it is your decision and your budget which will allow you to make the decision between the below:

Level Term

Your policy amount will stay level throughout your whole policy. Meaning if you insure yourself for £200,000 this will be the amount of tax-free cash lump sum that will be paid on death. This cover is the most widely used and the cost for this protection varies depending on the amount of cover you are looking to insure.

If you are looking to insure £300,000 over a 40-year term you are looking at approx. £20 a month for joint cover for you and your partner (subject to age and medical underwriting).

Decreasing Term

Your policy amount will decrease throughout the term, these polices work in line with your mortgage, decreasing as your debt does so that only your mortgage will be covered on death. This cover is generally the cheapest option depending on how large your mortgage amount is and the term.

Increasing Term

Your policy amount will increase throughout the term; this will usually increase in line with inflation so that on death the sum assured will be protected from erosion by price increases within the economy. This cover will usually be the most expensive due to the increase in cover amount, however it does give you protection for future price increases.

To answer the opening question, it depends how much cover you are looking for and what your monthly budget is.

Are you after a definite amount of cover that includes an amount to pay off your mortgage, an amount to account for future income payments or an amount to pay off any debts? Then level term is for you.

Are you after a level of cover for your mortgage only? Then decreasing term is for you.

Are you after protection that will increase in line with house and retail prices? Then increasing term is for you.

Overall the main point to take away from this blog post is to make sure your policy is the most suitable for you and your family’s circumstances.

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