mortgage life insurance

sanova76

Hi, 

I'm thinking to get a mortgage life insurance.  Is it better to get the level term or decreasing policy?  My understanding is, with the decreasing policy, the amount of pay out is decreasing as your mortgage become less?  So for example if I choose £150K for 15 years, each year I paid £10000 towards my mortgage, the pay out will be reduced £10000 each year?


Thanks in advance.

San

dunstonh

 Is it better to get the level term or decreasing policy? 

It is best to get the type that suits the need.  For some mortgages, it will be level. For others it will be decreasing.

My understanding is, with the decreasing policy, the amount of pay out is decreasing as your mortgage become less?

Yes.  That would fit a capital and repayment mortgage.

So for example if I choose £150K for 15 years, each year I paid £10000 towards my mortgage, the pay out will be reduced £10000 each year?

No.   The way your balance falls is curved.  Little in the early years and more in the later years.  DTA broadly follows that curve.

DullGreyGuy

You have to remember the insurance and the mortgage aren't tied... the idea of a decreasing life insurance is that the payout will roughly track the remaining capital of the mortgage but if you overpay the mortgage the insurance doesn't go down and if you are late in paying so pay fees or switch to an interest only mortgage the insurance will be under.

Assuming you already have other policies to deal with your other needs then decreasing is often preferred (or level for an interest only mortgage) but many people are underinsured and so for a little extra they go for a level term even with a repayment mortgage