Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Life insurance products vary, and suitability depends on individual circumstances.
Always seek advice from a qualified professional before making any decisions.
If you’re considering life insurance, one of the first decisions you’ll face is whether level or decreasing cover is most appropriate for your circumstances.
Both types of policy can provide valuable financial protection for your loved ones, but they are designed for different purposes. Understanding the differences can help ensure your family is financially supported should the worst happen.
This does not constitute advice and professional advice should be sought in all instances before acting on it.
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Understanding Level and Decreasing Life Insurance
Level term and decreasing term life insurance are two common options when considering life insurance cover. Each works differently and may be suitable depending on your financial commitments and long-term objectives.
Before choosing a policy, it is important to understand how each type of cover works and what it is designed to protect.
What Is Level Life Insurance?
Level life insurance provides a fixed payout throughout the duration of the policy.
For example, if you take out £500,000 of cover over a 25-year term, the policy will pay £500,000 if a valid claim is made at any point during those 25 years.
This type of cover is often considered by individuals who wish to provide a specific lump sum for their family. The payout could help cover household expenses, future education costs, outstanding debts or other financial commitments.
Benefits of level life insurance may include:
- A guaranteed payout amount throughout the policy term
- Financial certainty for dependants
- Support for longer-term family financial planning
- Protection that is not linked to a reducing debt
One consideration is that inflation may reduce the real-world value of the payout over time if cover levels are not reviewed periodically.
What Is Decreasing Life Insurance?
Decreasing life insurance provides a payout that reduces over the term of the policy.
Because the amount of cover decreases over time, premiums are often lower than comparable level cover policies.
Decreasing cover is commonly considered when protecting a repayment mortgage. As the mortgage balance reduces over time, the amount of cover reduces in a similar way.
Many homeowners choose decreasing life insurance to help protect their mortgage. You can learn more about mortgage options for medical and dental professionals on our Mortgages & Finance page.
Benefits of decreasing life insurance may include:
- Lower premiums
- Cost-effective protection for a reducing debt
- Often used alongside repayment mortgages
- Straightforward protection for homeowners
However, because the payout reduces over time, it may not provide the same level of protection for wider family financial needs.
Level vs Decreasing Life Insurance: Key Differences
The main distinction between these policies is how the potential payout changes over time.
| Feature | Level Cover | Decreasing Cover |
|---|---|---|
| Payout amount | Remains the same | Reduces over time |
| Typical premium | Higher | Lower |
| Family protection | Often used | May be limited |
| Mortgage protection | Can be used | Commonly used |
| Long-term certainty | Greater | Lower |
The most suitable option will depend on what you are trying to protect and your individual financial circumstances.
Which Type of Cover Is Often Used for Mortgages?
For many homeowners, decreasing life insurance is commonly used to help protect a capital repayment mortgage.
As the outstanding mortgage balance falls over time, the level of cover reduces in a similar way. This can make decreasing cover a cost-effective way to provide protection against a specific debt.
However, mortgage protection is only one aspect of financial planning and should be considered alongside a wider financial protection strategy.
Which Type of Cover Is Often Used for Family Protection?
If your primary objective is to provide financial support for your partner, children or other dependants, level life insurance is often considered.
A fixed payout may help support:
- Household living expenses
- Children’s education costs
- Outstanding debts
- Future financial commitments
- Family financial security
Because the payout remains the same throughout the term, level cover can provide greater certainty regarding the amount that could be available to your beneficiaries.
Life insurance is often just one part of a wider protection plan. You may also wish to consider your broader wealth protection strategy to help safeguard your family’s financial future.
How Much Life Insurance Might You Need?
The amount of life insurance required will vary from person to person.
Factors that may influence the level of cover required include:
- Mortgage commitments
- Household expenditure
- Number of dependants
- Existing savings and investments
- Future education costs
- Business commitments
- Pension arrangements
- Desired level of family protection
For medical and dental professionals, additional considerations may include NHS pension benefits, private practice income and partnership arrangements.
How Dental & Medical Financial Services Can Help
Choosing between level and decreasing life insurance is only one part of a wider financial protection strategy. Our Wealth Protection service helps medical and dental professionals review life cover, income protection and other financial protection arrangements.
At Dental & Medical Financial Services, we work with doctors, dentists and healthcare professionals to help them understand their protection options and how they fit into their wider financial plans.
Whether you are purchasing your first home, reviewing existing cover or looking to protect your family’s future, our advisers can help you explore the options available to you.
Speak to a Specialist Adviser
Discuss your protection requirements with advisers who understand the financial needs of medical and dental professionals.
Frequently Asked Questions
Is level life insurance more expensive than decreasing life insurance?
Generally, level life insurance premiums are higher because the payout amount remains fixed throughout the policy term.
Is decreasing life insurance suitable for a repayment mortgage?
Decreasing life insurance is commonly used alongside repayment mortgages because the level of cover reduces broadly in line with the outstanding mortgage balance.
Can I have both level and decreasing life insurance?
Some individuals choose to use decreasing cover for mortgage protection while maintaining separate protection arrangements for wider family financial needs.
How often should life insurance be reviewed?
Many people review their cover following significant life events such as purchasing a property, getting married, having children or changing employment.
Can doctors and dentists benefit from specialist financial advice?
Medical and dental professionals often have unique financial circumstances, including pension arrangements, private income and business interests, which may influence protection planning decisions.
