Mortgage protection insurance keeps the monthly premium costs down by imitating the profile of a repayment mortgage. A repayment mortgage is paid back over a specific term and this means that as time goes by the amount owed by you reduces. Mortgage protection insurance takes this into account and ensures that you have a similar amount of cover as you have debt at any one time (assuming all mortgage repayments are made).
As the amount of cover reduces each year this kind of policy would usually only be recommended with a repayment mortgage, as to use it with an interest only mortgage for example could leave you under insured in years to come.
This type of cover isn’t really designed for “family protection” as the lump sum decreases during the policy term so provides cover to help protect a reducing debt, such as a repayment mortgage (assuming all monthly payments are made).
There are a number of extra benefits that can be added to decreasing term insurance including critical illness cover, this policy has no cash in value at any time.
Level term insurance is life cover that stays the same throughout the agreed term of the plan. The policy will be taken out for a specified period of time and in the case of a mortgage this would normally tie in with the term agreed at the outset.
Level term can also be used to provide family protection, giving you the peace of mind that your family will receive a lump sum set by you if you were to die during the policy term.
There are a number of extra benefits that can be added to level term insurance including critical illness cover, this policy has no cash in value at any time.