What is level term life insurance?
Level term life insurance pays a fixed lump sum — the same amount regardless of when during the policy term a claim is made. If you take out a £300,000 level term policy and die in year 2 or year 28, your beneficiaries receive £300,000.
What is decreasing term life insurance?
Decreasing term life insurance pays a lump sum that reduces over time — typically designed to mirror a repayment mortgage. The payout is highest at the start of the policy and reduces each year, reaching approximately zero at the end of the term.
Level term vs decreasing term — key differences
| Feature | Level Term | Decreasing Term |
|---|---|---|
| Payout amount | Fixed throughout term | Reduces each year |
| Cost | Higher premium | Typically 20–35% cheaper |
| Best for | Income replacement, interest-only mortgage | Repayment mortgage protection |
| Flexibility | High — use payout for anything | Aligned to mortgage debt only |
Which is better — level or decreasing?
It depends on your primary reason for buying life insurance:
- Choose decreasing term if: you mainly want to clear your repayment mortgage and your other financial needs are modest
- Choose level term if: you want to replace your income for your family, you have an interest-only mortgage, or you want maximum flexibility with the payout
- Consider both: many people have a decreasing term policy to cover their mortgage and a level term policy to replace their income — giving comprehensive cover at a combined cost that's often still competitive
Can I have both?
Yes — you can hold multiple life insurance policies. A decreasing term policy to track your mortgage balance, plus a level term policy for income replacement, is a popular combination that provides comprehensive protection.
Frequently Asked Questions
Yes — for people whose primary goal is mortgage protection on a repayment mortgage. It's typically 20–35% cheaper than level term and is perfectly aligned to reducing mortgage debt.
Not on an existing policy — you would need to take out a new level term policy. You can keep both running simultaneously if you want to upgrade your cover.