The above illustration shows the difference between Level term Assurance and Reducing term Assurance ( often called mortgage protection ).
"Term life insurance is a simple and inexpensive form of life insurance policy that pays out a lump sum (the sum assured) in the event of the death of the policyholder, and is necessary to ensure that your family and dependants will not suffer financially if the worst should happen. Term insurance is usually available on either a single or joint life basis and some plans also have additional benefits such as paying out on the diagnosis of a terminal illness during the term of the policy. If the policyholder or policyholders are alive at the end of the term the policy expires and no payment is made. If you stop paying premiums at any Stage during the term, the policy lapses and has no value. There are several types of term insurance, decreasing term assurance is detailed below.
DEACREASING/REDUCING TERM ASSURANCE (often called 'Mortgage Protection')is where the sum assured decreases over the term of the policy. This is commonly used to protect a capital & interest repayment mortgage, where the outstanding balance reduces each year.
Uses Include
Life cover to protect a mortgage
Life cover to protect a loan
Benefits include
More affordable premiums than Level term
Tax free lump sum payable on death during the term
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