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Decreasing or level term assurance

Do you want the payout amount to remain the same throughout the length of the policy?

You can specify when the policy ends and you can decide whether the payout decreases as the months or years go by (a 'decreasing term assurance' policy) or whether it remains the same ('level term assurance').

Normally, you only opt for decreasing term assurance if it's for paying off your mortgage should you die. As the amount outstanding on a repayment mortgage decreases over time, your cover should reduce as well. This does not work for endowment or other variable mortgages.

One alternative is often called a family income benefit policy, which pays a monthly income y instead of a big lump sum. Not only does this make the money easier to manage, but it's often an awful lot cheaper too.

Another variation is to take one of the many variations on automatic increases, optional increases or index linking. This will help keep the value of the policy up as inflation rises. Like anything else, you pay extra.

On some you can just increase it in line with a set Index link.  On others you can increase it by various percentages each year, agreed in advance.  Another variant is to have an option to increase cover at each renewal.

Select decreasing term assurance for mortgages and, usually, level term assurance for other purposes.

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