Decreasing term life insurance pays out a sum that reduces over time — designed to match a repayment mortgage balance. Level term keeps the payout fixed for the whole policy length, leaving extra cash for the family on top of clearing the loan.
Decreasing Term Life Insurance
Also called Mortgage Term Assurance (MRTA) or Decreasing Term Assurance (DTA). The sum assured falls each year, broadly tracking what's left on a capital-and-interest repayment mortgage.
Best for: standard repayment mortgage holders who only want the loan cleared if they die.
Watch out for: the payout reduces on a fixed mathematical curve at a notional interest rate (often 6–8%). If your actual mortgage rate is much lower, the policy can decrease faster than your balance — leaving a small shortfall in early years.
Level Term Life Insurance
The sum assured stays fixed for the full policy term. Pay £200,000 of cover for 25 years and your family receives £200,000 whether you die in year 2 or year 24.
Best for:
- Interest-only mortgages — the loan balance never reduces
- Families wanting cover that goes beyond clearing the mortgage
- People with a partner who'd need extra capital to live on, not just a debt-free home
Family Income Benefit — A Third Option
Family Income Benefit (FIB) pays a monthly tax-free income to your family until the policy term ends, instead of one big lump sum. It's typically the cheapest of the three because total payouts reduce as the term progresses.
Pairing FIB and a smaller decreasing term policy is a common combination — clears the mortgage on death and replaces lost salary for the rest of the term.
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Which Is Cheaper?
For a healthy 35-year-old non-smoker, £200,000 of cover over 25 years (illustrative):
- Decreasing term: ~£8–£12 per month
- Level term: ~£12–£18 per month
- Family income benefit (£12k/year): ~£8–£11 per month
Premiums depend on age, smoker status, health, and the insurer. Get a personalised comparison free with our adviser.
Bundling With Other Protection
Most homeowners benefit from layering two or three policies rather than relying on one:
- Term life (decreasing or level) — clears the mortgage on death
- Critical illness cover — pays a lump sum on serious diagnosis (you may survive but be unable to work)
- Income protection — replaces monthly income if you can't work due to illness or injury
Get a free protection review — we'll model what your family actually needs, not what looks pretty in a spreadsheet.
Frequently Asked Questions
- Will the lender insist I take their life insurance?
- No — and you usually shouldn't. Lender-arranged policies are often more expensive and rarely tailored. You're free to use any FCA-regulated protection provider.
- What if I overpay my mortgage?
- On decreasing term, your loan balance may reduce faster than the policy sum assured — leaving slight over-cover. That's fine. The reverse (under-cover) is the issue and usually only happens with very low interest mortgages.
- Can I increase my level term cover later?
- Most modern policies include 'guaranteed insurability options' — moving home, marriage, or having a child lets you increase cover without re-underwriting.
- Do I need to renew at the end of the term?
- No — the policy ends and cover stops. If you still have a mortgage, you'd take out a new policy (likely at a higher premium reflecting your current age and health).
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