Level term life insurance is where the premiums and amount of cover stay the same during a policy term, regardless of when the insured person passes away.
Sometimes known as mortgage life insurance, decreasing insurance means the payout amount reduces each year. It’s generally used to help pay off a repayment mortgage.
The payout amount goes up in time as does your monthly payment. Many choose it to protect the value of the payout against inflation, the rising cost of living.
How Much Cover Should I Have?
A rule of thumb is to cover 10 times the main breadwinners income. The aim is to have enough cash to cover the lack of income if you're gone. So if you've no partner or children who need the money don't bother. If you do need cover, it's important to consider the financial impact if you died.
You need to ensure that you take out enough to cover your mortgage. For example, if you’ve got a 25 year mortgage for £450,000 and you take out mortgage life cover for £300,000, you’ll be at risk of underinsuring your mortgage. Which means your family will be left with a shortfall to cover the outstanding mortgage.
Should I Write My Life Policy Into Trust?
Writing a policy in trust means the payout from the policy will be paid directly to the beneficiaries rather than your estate. Because the policy is held within trust it means that the payout won’t be subject to inheritance tax. It also means payment to your beneficiaries will probably be quicker, as the money will not go through the probate process. Instead, the insurer can arrange the payout once they’ve received the death certificate and any other required documents.
Rettie Financial Services Ltd is an appointed representative of Mortgage Advice Bureau Limited and Mortgage Advice Bureau (Derby) Limited which are authorised and regulated by the Financial Conduct Authority.
Rettie Financial Services Ltd. Registered Office Address: Deuchrie, Dunbar, East Lothian, United Kingdom, EH42 1TG. Registered in Scotland Number: SC711925.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
For insurance business we offer products from a choice of insurers.
Your home may be repossessed if you do not keep up repayments on your mortgage.