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Level term or decreasing life insurance: which do you need?

Decreasing term life insurance is designed for a repayment mortgage. Its payout falls each year, and it usually costs less than level term. Level term pays the same lump sum throughout, and Santander and Post Office point to it for an interest-only mortgage or money for your loved ones.

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In short

  • Level term pays the same lump sum if you die at any point in the term. Decreasing term cover falls each year and is designed for a repayment mortgage.
  • Decreasing cover usually costs less than level term, because the cover falls over time.
  • With decreasing cover from LV=, Halifax, Barclays and Nationwide, your monthly payment stays the same while the cover falls.
  • On an interest-only mortgage, you still owe the full loan at the end of the term. Santander and Forester Life point to level cover for that kind of mortgage, and to decreasing cover for a repayment one.
  • Legal & General warns that a decreasing policy may not clear your mortgage in full. That can happen if the rate it uses is lower than your mortgage rate, or if your mortgage changes.
  • Aviva and Royal London warn that inflation reduces the value of a fixed payout over time. If your family would mainly miss your income, family income benefit pays regular amounts instead of a lump sum.
  • You don't have to pick one. Tesco, for example, lets you hold level and decreasing cover at the same time.

What's the difference between level and decreasing cover?

The difference is the payout. Level term pays the same lump sum throughout the term, and decreasing term cover reduces over time.

Both are term life insurance, one of the main types of life insurance. Term cover protects you for an agreed period (the term), such as five, ten or 25 years. If you die during the term, the policy pays out a lump sum.

With level term cover, the payout stays the same and premiums are fixed unless the policy is reviewable (the insurer can review and change them). Reviewable policies tend to cost less at the start. On Aviva's Life Insurance Plan and at LV=, both the cover amount and the monthly premium stay fixed for the term.

With decreasing term cover, the payout goes down each year. It's designed for repayment mortgages, where the loan also falls over time. Legal & General says its Decreasing Life Insurance is often called mortgage life insurance, and Beagle Street calls it mortgage term life insurance.

Level term vs decreasing term
Feature Level term Decreasing term
Amount of cover Stays the same throughout the term Falls over the term
How the cover changes It doesn't change Roughly in line with the way a repayment mortgage decreases
Monthly premium Fixed, unless the policy is reviewable Stays the same while the cover falls, on the policies quoted here
Cost Usually more than decreasing cover Usually less expensive than level term
Built for A sum that doesn't fall, such as an interest-only mortgage or money for your loved ones A reducing debt such as a repayment mortgage
What a claim pays The same lump sum at any point in the term Less the later in the term the claim is, because the cover goes down
If you outlive the term Cover ends and you don't get back what you've paid Cover ends and you don't get back what you've paid

Features differ between insurers and policies: check the key features and policy schedule of any quote.

How much does decreasing term cover fall, and will it clear your mortgage?

Decreasing cover falls roughly as a repayment mortgage does. On many policies, how fast it falls depends on an interest rate set for the policy.

Forester Life explains that the cover falls by small amounts at first and by larger amounts towards the end of the term. At Barclays (provided in partnership with Legal & General) and Scottish Widows, how the cover reduces depends on the mortgage interest rate shown on your policy schedule.

Interest rate behind decreasing cover
Insurer Rate the cover is based on
Aviva Life Insurance Plan A fixed 8%, with the cover reducing every month
Beagle Street, sold direct 6%; if your mortgage rate is higher, the payout might not clear the debt
Best Insurance A fixed 8%, designed to match a repayment mortgage
Blueberry Life Equivalent to 8% a year, reducing each month to zero by the end of the term
Scottish Widows Protect A fixed rate you choose, from 0% to 18%

Check the policy's interest rate

Legal & General warns that the payout may not repay your mortgage in full if the rate it applies is lower than your actual mortgage rate, or if your mortgage changes. Blueberry Life's policy wording also states that its policy doesn't guarantee to clear any outstanding debt.

When a claim is made, Assura Protect pays 100% of the sum assured (the amount of cover) as it stands on the claimable event date. Under LV='s Life Protection conditions, LV= normally pays what's left on your mortgage from the date of death or terminal illness diagnosis, plus interest built up since then, if the policy's mortgage conditions are met.

Some policies add a guarantee. Post Office's Decreasing option, insured by Scottish Friendly, includes a Mortgage Guarantee. If the benefit is less than your outstanding mortgage on a valid claim, Scottish Friendly pays the outstanding mortgage.

That guarantee applies only if the shortfall is solely because your mortgage was charged more than 8% a year. Your mortgage interest rate must also have been under 10% when the policy started, and other conditions apply.

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Who needs cover?

£150,000
25 years

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Which cover suits a repayment or an interest-only mortgage?

Decreasing cover is designed for a repayment mortgage, while level cover is commonly used for an interest-only mortgage.

Most mortgages offered now are repayment mortgages, where you repay capital (the amount borrowed) and interest together. The amount you owe falls every month and, if you keep up the repayments, the loan is cleared by the end of the term, usually 25 years.

With an interest-only mortgage, you pay only the interest each month and repay the capital at the end. On a £250,000 interest-only mortgage over 25 years, you still owe the full £250,000 when the 25 years are up. Very few interest-only mortgages are offered now, usually only for buy-to-let or later-life borrowing.

  • On a repayment mortgage, decreasing cover is built to fall as your debt does. Santander says its decreasing cover should clear a repayment mortgage as long as all mortgage repayments are made. Forester Life, Halifax and TSB also point to decreasing cover for repayment loans.
  • An interest-only loan doesn't fall. LV= and Sainsbury's say their decreasing cover isn't suitable for an interest-only mortgage, and Post Office says its Decreasing option may not suit one. Best Insurance, Forester Life, Post Office and Santander point to level cover for an interest-only mortgage.
  • Barclays and TSB say their level cover can be used for a repayment mortgage as well as an interest-only one. It usually costs more than decreasing cover. As its payout doesn't fall with the loan, a claim later in the term could leave money over once the mortgage is cleared.

Keep the cover in step with your mortgage

Legal & General's policies aren't linked to your mortgage, even if you set them up at the same time. They still pay a valid claim in the term if the mortgage is gone. If your mortgage changes, the payout may not clear it unless you adjust your cover. Barclays says your cover should match what you still owe, and the policy won't update itself if your finances change.

You don't legally need life insurance to get a mortgage, though Nationwide notes some lenders may make it a condition of lending. Most mortgage providers offer cover automatically with a mortgage, and MoneyHelper says you may find a better deal elsewhere.

Which cover suits your family's needs beyond the mortgage?

Level cover leaves a fixed lump sum for family costs. Family income benefit pays a regular income instead.

The amount of cover you need depends on your debts, your mortgage or rent costs, your current income and how many children or other dependants you have. Aviva, Barclays and TSB say a level payout can help your loved ones with living costs, rent, mortgage payments or education.

Level cover and inflation

A level payout doesn't grow, and Aviva and Royal London warn that inflation will reduce its value over time. With increasing term cover, both the cover and the premiums rise during the term to keep in line with inflation.

If your family would mainly miss your income, family income benefit pays regular amounts to your dependants instead of a lump sum. Zurich's Family Income Cover pays a monthly amount agreed at the start until the end of the term, and Zurich says it isn't suitable for a one-off payment such as a mortgage.

Our family income benefit calculator shows what a monthly income would add up to over your term.

  • At Guardian, Life Protection is available as level, increasing (linked to the Retail Prices Index, RPI), decreasing or Family Income Benefit, which is level only.
  • LV='s Family Income Benefit includes a 'Pay My Mortgage' facility. Depending on their circumstances when they claim, your beneficiaries can have some or all of the monthly income paid straight to their mortgage lender.
  • Employee packages often include death in service benefit linked to your salary, which can count towards what your family would need. That cover stops if you leave that employer.

How much life insurance do you need?

Add up what your family would need to cover, then take away your savings and any cover you already have.

The amount left to pay

Loans, car finance, credit cards

Your take-home pay

Until children are independent

For future education costs

Our assumption: change it to suit you

Funeral and other one-off costs

Subtracted from total

e.g. death-in-service

Your estimate

£500,000

based on the figures you entered

  • Mortgage £180,000
  • Income replacement £280,000
  • Other debts £8,000
  • Children’s education £40,000
  • Final expenses £4,000
  • Less savings & existing cover −£15,000

£512,000 of costs less £15,000 is £497,000, rounded up to the nearest £5,000.

An on-screen estimate based on the figures you enter. It isn’t a recommendation or a quote.

How it works, with a worked example: Life insurance calculator

Is decreasing cover cheaper than level term?

Decreasing cover usually costs less than level term, because the cover falls over time.

Aviva, Best Insurance, Forester Life and Halifax say their decreasing cover has lower premiums or usually costs less than level cover. Post Office calls decreasing cover the most affordable type of its life insurance because its monthly premiums are lower than level cover.

A lower premium for less cover later

At Blueberry Life, the decreasing premium stays the same every month, and the total paid over the term may be lower than for level term. The cover reduces every month, though, and reaches zero by the end of the term.

For either type, your monthly payment also depends on your age, health, lifestyle and whether you smoke. Your family medical history, the length of the policy and your occupation count too.

MoneyHelper says premiums vary, so it's worth shopping around and comparing quotes. The price illustrations at the foot of this page show example premiums for level and decreasing term cover.

Can you have level and decreasing cover at the same time?

Yes. You don't have to pick one type: Tesco, for example, lets you hold both at once.

One way to split your cover is a decreasing policy matched to your repayment mortgage, plus level cover or family income benefit for your family's other needs. Only the mortgage cover falls, and each policy can run for as long as its need lasts.

Combined policies exist too. HMRC's tax rules recognise ones that pair whole of life cover, term cover or an endowment with family income cover or mortgage protection (decreasing) cover.

  • A plan with several covers may still be separate policies. In a Scottish Widows Protect plan, each cover you choose is set up as a legally separate policy.
  • Holding several policies can mean extra checks. Tesco says its insurer, Aviva, may do a more in-depth financial assessment if your total cover is high.
  • For a couple, a joint policy usually costs less than two single policies, but it pays out only on the first death and then ends. Two single policies pay out on each death.

What to check before you choose

Start with your mortgage type and rate, then work out what else your family would need.

  1. Write down what the payout is for It might clear the mortgage, pay rent or childcare, or replace your income. If covering everything costs too much, MoneyHelper suggests thinking about your priorities or considering a lower level of cover.
  2. Check your mortgage details Find out whether it's repayment or interest-only, what you owe, how long is left and your interest rate. Your latest mortgage statement is one place to look.
  3. Compare the policy rate with your mortgage rate For decreasing cover, Nationwide and Legal & General say to check that the policy's interest rate is the same as, or higher than, your mortgage rate.
  4. Decide how long each need lasts The mortgage cover can match the mortgage term. Cover for your family might run until your children are grown up.
  5. Compare quotes for each option Premiums vary, so compare level, decreasing and a mix of the two. Reassured, our broker partner, compares quotes from a panel of leading insurers, with free quotes and no obligation.

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Level or decreasing life insurance FAQs

Neither is better for everyone. It depends on what the payout needs to cover. Decreasing cover suits a reducing debt such as a repayment mortgage and usually costs less. Level cover pays the same amount throughout the term, which fits an interest-only mortgage or a lump sum for your family.

It depends on whether someone relies on you financially. MoneyHelper says life insurance suits people with dependants, such as school-age children or a partner who relies on their income, and wouldn't suit someone with no dependants. Level cover usually costs more than decreasing cover. It also pays nothing if you outlive the term: Legal & General says its policies have no cash value.

Often, yes. Legal & General says its Decreasing Life Insurance is often called mortgage life insurance, and Beagle Street uses "mortgage term life insurance" as an identical term for decreasing term. Level cover can protect a mortgage too, and Santander says it's commonly used for an interest-only mortgage.

No, not on the decreasing policies described here. With LV=, Halifax, Barclays and Nationwide, the cover falls over time while your monthly payment stays the same.

Not always. Legal & General warns that the payout may not repay your mortgage in full if the policy's interest rate is lower than your actual mortgage rate, or if your mortgage changes. Blueberry Life's policy wording states that the policy doesn't guarantee to clear any outstanding debt. Some policies add a conditional guarantee, such as Post Office's Mortgage Guarantee.

Yes. Barclays and TSB say their level cover can help with both interest-only and repayment mortgages. It usually costs more than decreasing cover, but the payout doesn't fall as the mortgage does.

The later in the term you die, the lower the payout. Assura Protect, for example, pays 100% of the sum assured as it stands on the date of the claimable event. On LV='s Life Protection, the insurer normally pays the balance left on your mortgage from the date of death or terminal illness diagnosis, plus interest built up since then, if the policy's mortgage conditions are met.

With either type, the cover ends and you don't get your premiums back. Legal & General and Halifax (for Scottish Widows plans) say their policies have no cash value, so nothing is paid if the term ends without a claim. Santander says you won't get back the money you've paid.

With some insurers, yes. Aviva's Critical Illness Plan offers level, decreasing or increasing cover, and Aviva says decreasing critical illness cover is generally cheaper than level cover. See critical illness cover for how it works.

That's a separate choice from whether the cover is level or decreasing. MoneyHelper explains that a policy written in trust isn't counted as part of your estate and can be paid outside probate and inheritance tax. See life insurance in trust.

This article is for general information only and should not be considered financial advice. The right cover depends on your personal circumstances.

Sources

The facts on this page come from these sources.

  1. MoneyHelper: What is life insurance? (opens in a new tab); Interest-only and repayment mortgages explained (opens in a new tab); Ways of repaying an interest-only mortgage (opens in a new tab); Life insurance for new parents (opens in a new tab); How to know what kind of protection insurance you need (opens in a new tab) · moneyhelper.org.uk, accessed 26 September 2026.
  2. Association of British Insurers: Term insurance (opens in a new tab) · abi.org.uk, accessed 26 September 2026.
  3. Nationwide Building Society: Mortgage life insurance (opens in a new tab) · nationwide.co.uk, accessed 26 September 2026.
  4. Legal & General: Decreasing Life Insurance (opens in a new tab) · legalandgeneral.com, accessed 25 and 26 September 2026.
  5. GOV.UK: IPTM8080 - Combined policies: family income cover and mortgage protection cover: ICTA88/SCH15/PARA9 (opens in a new tab) · gov.uk, accessed 2 October 2026.
  6. Reassured: Reassured homepage (opens in a new tab); Contact Reassured (opens in a new tab); Terms and Conditions (opens in a new tab) · reassured.co.uk, accessed 2 October 2026.
  7. Insurer documents: Assura Protect, Aviva, Barclays, Beagle Street, Best Insurance, Blueberry Life, Forester Life, Guardian, Halifax, Legal & General, LV=, Post Office, Royal London, Sainsbury’s, Santander, Scottish Widows, Tesco Insurance, TSB, Zurich.
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