Decreasing term life insurance
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What is decreasing term life insurance?
Decreasing term life insurance is a type of life insurance policy that pays out less over time. It’s often used to cover the balance of a repayment mortgage. This is because the balance of the mortgage decreases over time and is paid off in full at the end of the term.
The policy will pay out if you die while it is running. Your provider may also pay out earlier if you’re diagnosed with a terminal illness. But check the terms and conditions before you buy, so you know for sure.
Some policies offer the opportunity to add on critical illness cover for an extra cost. This type of insurance pays out a lump sum if you suffer a serious illness or injury. But what counts as a critical illness can vary widely between providers, so you need to know what you’re signing up to.
A few mortgage lenders might insist that you have a life insurance policy with your mortgage.
How does decreasing term life insurance work?
Decreasing life insurance is aimed at people whose financial commitments reduce over time.
You’ll take out a decreasing term life insurance policy for a fixed period of time, called the ‘term’. Your premiums can be either annual or in monthly payments.
The amount the life insurance policy pays out falls as the insurance term progresses, on a monthly or yearly basis. It will be down to zero by the end of the term.
So, if you were to die near the beginning of the term, your loved ones would receive more money than if you died nearer to the end of the term.
What are the pros and cons of decreasing term life insurance?
There are several advantages to taking out decreasing term life insurance. But whether it’s the right level and type of cover for you will depend on your personal circumstances.
Pros of decreasing life insurance
- Cheaper to buy: Monthly premiums are often lower than with other types of life cover.
- Protect your mortgage: Decreasing term life insurance is a popular type of life policy with people who have a repayment mortgage. The amount paid out should decrease broadly in line with your mortgage.
- Fixed premiums: So you’ll always know how much you are paying.
- Support for loved ones: So they know that there’ll be the money to pay off your mortgage or other debt(s) that they could be responsible for if you die.
- Extra benefits: Some life insurance policies come with added benefits such as health helplines.
Cons of decreasing life insurance
- Won’t work with interest-only mortgages: The payout from the policy reduces each year. So it wouldn’t be enough to pay off the mortgage balance, which stays the same throughout the whole mortgage term.
- Drop in value: As time passes, any claim on a decreasing term life insurance policy will be worth less. So, check the interest rate given with any quote to make sure that your life cover wouldn’t fall significantly faster than what you owe on your mortgage.
- No maturity value: If you live beyond the end of the plan, there’ll be no payout after the policy ends.
- The amount of cover might not be enough for everything: If your payout has reduced in value over time, it may not cover other things like outstanding debts, childcare, living expenses or funeral costs.
What other types of cover should I think about?
Other types of life insurance to consider include:
Level term
The payout from a level term policy stays fixed throughout the course of a plan. Your dependants could use it to pay off a mortgage and to cover other expenses, like funeral costs, if you die within the term. But you’ll often pay more for this type of cover.
You could choose a level term life insurance policy to help protect your family’s lifestyle and pay for living expenses, to sit alongside a decreasing term policy to cover your mortgage.
Level term life insurance could also be a useful addition if there’s a mismatch between the date of paying off your mortgage and the time your caring responsibilities for children or the older generation ends. You needn’t pick the same term for both policies.
Death in service
If you’re working it’s worth checking whether you have death in service benefit through your employer. This will pay out to your beneficiaries if you die while on the payroll.
Often, death in service benefit is based on a multiple of your salary. This may not be enough to support your family. If that’s the case, you should probably still think about life insurance. Also, if you change jobs, you’ll lose your death in service benefit and life insurance might be more expensive to buy as you’ll be older.
Joint life insurance
Joint life insurance insures two people on one policy. It’s cheaper, but will pay out only once. So the remaining person would have to take a new policy out at that point.
How much does life insurance cost?
A life insurance policy doesn’t have to be expensive. On average we found that people we helped could find a life insurance quote from £15.72 a month[1].
[1] 51% of our customers were quoted less than £15.72 per month for their life insurance for a 10-year term, up to £100k worth of cover and no critical illness cover in June 2025.
How do I compare life insurance?
Find our lowest prices on life insurance and see if you could save. Just tell us a few details about yourself and your health, plus how much cover you want and the length of cover you need.
If you’re not sure how much life insurance you need, our calculator can help you work it out.
The list of quotes we provide will also show you optional extras you might want to add, like critical illness cover. We’ll help you find a deal that works for you.
Get a quote nowIf you’re not sure how much you need or what type of policy to get, our life insurance partners at LifeSearch will be happy to help. Just give them a call. Lines are open:
0800 072 1147
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[2] Correct as of June 2025.
[3] As of July 8th 2025, Compare the Market had an average rating of 4.9 out of 5 from 93,668 people who left a review on Trustpilot. The score 4.9 corresponds to the Star Label ‘Excellent’.
What our expert says...
“Decreasing term insurance isn’t just for mortgages. If you take out a loan that could be passed on to your dependants if you died, then you may want to consider decreasing term insurance for that too.”
- Tim Knighton, Life, health and income protection insurance expert
What’s the difference between level term and decreasing term life insurance?
Level term insurance is designed to pay out a set amount if you die within the term of the policy. It can help your family with household bills and pay for your funeral. If you have enough cover, it could also pay off your mortgage. But it’s more expensive than decreasing term life insurance, as the payout stays the same for the whole term.
Decreasing term insurance, on the other hand, is mainly for people with repayment mortgages whose dependants can cover other expenses. The lump sum paid out reduces throughout the length of the policy, roughly in line with the mortgage. It’s typically cheaper than level term insurance.
Frequently asked questions
Do I have to take out decreasing term life insurance if I have a mortgage?
Strictly speaking, you don’t need any kind of life cover when you take out a mortgage. However, some mortgage lenders may require it.
But some type of life insurance could be a sensible option if you have people who depend on you to pay the mortgage. Imagine if something happened to you and your family could no longer afford to stay in their home, for example.
Can I get decreasing life insurance with critical illness cover?
Yes, for an extra cost, you can add critical illness cover to your life insurance with decreasing cover policy. It could pay out a cash sum if you’re diagnosed with an illness or serious condition specified in your policy documents. This can include a heart attack, stroke and several types of cancer.
