Decreasing Life Insurance
A plan designed to help protect a repayment mortgage. It pays out the amount of cover if the life assured dies or is diagnosed with a terminal illness during the term of the plan. The amount of cover decreases over the term of the plan.
Premiums are guaranteed.
Where a decreasing lump sum is required to help provide financial support to a spouse, partner, registered civil partner or dependant in the event of death or becoming terminally ill, for example as the amount of cover decreases in line with a child aging and childcare costs reducing.
Where there is a need to protect a repayment mortgage with a policy that pays out the decreased lump sum of the policy in the event of death or terminal illness.
Where a lump sum is required to:
- Cover a repayment business loan.
- Purchase the shares owned by a director or partner.
- Cover an interest only business loan.
Suitable if customers
- Want to take advice on the suitability of the product
- Want the level of cover to decrease throughout the term of the policy.
- Need a lump sum in the event of death or terminal illness and have dependants, and are not willing/able to self-insure or do not have funds elsewhere.
- Have a business need to cover the loss of a key person, to provide finances to purchase shares of a director or partner in the event of their death, or to cover an interest only business loan.
- Have medical conditions that do not prevent provisions of cover and are happy to be underwritten.
- Are UK resident and can afford relevant monthly premiums for term cover.
- Want the choice of a decreasing rate or 7%, 8%, 9% or 10%.
Unsuitable if customers
- Wish to purchase direct without advice
- Want their policy to remain level throughout the term of the plan (Life Insurance).
- Want a product to pay a monthly benefit FPIP), or cover an interest only mortgage.
- Want a product to pay a benefit if they are unable to work for a period of time due to accident or injury (IPB).
- Do not have a business need to cover the loss of a key person, to provide finances to purchase shares of a director or partner in the event of their death, or to cover an interest only business loan.
- Have health conditions that may result in cover not being issued.
- Have no dependants and are willing to self-insure and have sufficient funds or cover elsewhere.
- Require a non-underwritten journey.
- Are unable to afford term cover and are not UK resident.
Amount of Cover
- No minimum sum assured. Driven by minimum premium.
- No set maximum sum assured - subject to negotiation with re-insurers, except if Critical Illness Cover or Critical Illness Extra are chosen, when the maximum amount of cover limits will be:
£3 million - if Specific Work Tasks definition is chosen under TPD, or
£2 million - if Own Occupation definition is chosen under TPD.
- The amount of cover decreases roughly in line with the way a repayment mortgage reduces during the policy term.
- The minimum term allowed is 5 years.
- The maximum term allowed is 50 years (or 40 years if Critical Illness Cover or Critical Illness Extra are chosen).
- The minimum age to take out a policy is 18. It is possible for a life of another policy to be taken out on a 17 year by an adult with insurable interest. This policy can then be placed in an Absolute trust with the 17 year as the beneficiary.
- The minimum age at the end of the policy is 29.
- The maximum age for buying a policy is 74 (or 64 if Critical Illness Cover or Critical Illness Extra are chosen).
- The policy must by their 90th birthday (or 70th birthday if Critical Illness Cover or Critical Illness Extra are chosen).
- Choice of guaranteed or reviewable premiums if Life Insurance with Critical Illness Cover or Critical Illness Extra is chosen.
- Payable monthly or annually by Direct Debit.
Options available at an additional cost
Benefits automatically included at no extra cost
- For joint life policies, benefit is paid on the first death.
- Policies can be placed in trust.