Decreasing term life insurance

How does decreasing term life insurance work?

Decreasing life insurance pays out less the further into the policy you get.

This means that if you pass away during the first few years of your cover term your beneficiaries would get more money than if you passed away in the last few years of your cover term. 

For this reason, decreasing term policies are usually taken out to cover a repayment mortgage, which also decreases over time. 

What does 'cover term' mean?

When will my policy pay out?

Life insurance policies pay out if you die during the cover term.

According to the Association of British Insurers, 98% of all life insurance claims are accepted. So your policy should pay out in the majority of circumstances.

That said, there are a few situations where your policy may not pay out. These can differ slightly between insurers, but in most cases your policy won’t pay out if:

• You die from suicide in the first 12 months of your policy: Suicide is typically covered after the first 12 months, but most policies will not accept a claim in the first year of a policy. This includes death as a result of serious self-injury. 
• You fail to give accurate details: This could be something like failing to declare a health condition you knew you had before your policy began. If you then died as a resut of that condition, your policy may not pay out.

To see exactly what your policy covers you for, always check the policy documents your life insurance provider gives you. 

Can I add critical illness cover to my policy?

Yes, most insurers will allow you to add critical illness cover to your policy. This allows you to make a claim if you suffer a serious injury or illness.

If your claim is successful, the money you receive can be used to support yourself or your family if you’re unable to work. It could even be used to make alterations to your home if you find yourself with a disability. 

Each insurer has their own definition of a ‘serious illness or injury’ so always check your policy documents to see exactly what you’re covered for.

Adding critical illness cover to your policy will usually increase your monthly premium, so you should think carefully about whether or not it’s something you really need. 

Can I alter my policy if my circumstances change?

Yes, if you need to change your life insurance policy you should be able to do so.

If you’ve just had kids, moved into a new home or paid off your mortgage early, increasing or decreasing your cover amount can be a good idea. And most insurers should allow you to do so. 

To do this, contact your insurer to see what your options are. You may be able to change your cover level there and then.

Can I get cover if I have a pre-existing condition?

Yes, in most cases you should be able to find cover if you have a pre-existing condition like diabetes, asthma or high blood pressure.

Most insurers will still cover you if you live with one of these conditions, but you may have to pay a bit more than average for your policy.

This is because insurers base their policy prices on risk, and having a known condition makes you appear ‘riskier’ to insure. The higher your risk, the higher your policy price.

It’s also worth bearing in mind that some conditions may not be covered at all. If you have a terminal illness, or an extremely serious condition, you’re unlikely to find cover.

Get a quote to see exactly which insurers are willing to cover you.