Level Cover vs Decreasing Cover

zwischenzug

I'm looking at getting life insurance and I'm confused about level cover as opposed to decreasing cover.

For example I can get a joint level cover for £300k over 20 years for £20 a month.

I can also get decreasing cover for an initial £500k over 20 years for £20 a month.

Are you obliged to continue paying for the policy for the full 20 years in both cases or can you cancel at any time? What doesn't seem to make sense to me is that surely if you can cancel at any point decreasing cover would always be better, because you are insured for a bigger amount, and once time has passed sufficiently so that the payout is less than the level cover equivalent (ie under £300k in my example), what's to stop you just cancelling the decreasing cover and restarting it from £500k again? Or just cancelling it full stop, wouldn't that mean you've had better cover than the level equivalent for the same price or less - what am I missing here?

dunstonh

Are you obliged to continue paying for the policy for the full 20 years in both cases or can you cancel at any time?

You can cancel any time but you need to remember your health can change and also replacements get more expensive as you get older.

What doesn't seem to make sense to me is that surely if you can cancel at any point decreasing cover would always be better

No. The decreasing sum assured will end up at zero. So, whilst it may start higher, it will end up lower.

what's to stop you just cancelling the decreasing cover and restarting it from £500k again?

your health and your age.

kingstreet

Unless you are buying cover for debt repayment, or tax mitigation, chances are you are trying to cover the loss of an income in the event of death.

Family Income Benefit would more closely meet such a need, providing the lost income for the period required. As this is effectively decreasing cover, this is cheaper than a term assurance alternative.