Decreasing life assurance is a policy that will give you a certain amount of cover for a specific term and will give you a lump sum payout if you happen to pass away at any point during the term of the policy. However, the uniqueness of this type of policy is that it the amount of cover available to you will decrease over the length of the term with the amount of cover being less the longer the policy goes on.
You will find with this type of policy that it will pay out on the death of the person and that the lump sum that will be paid out will go down by an amount fixed and determined from the outset of the life assurance and will go down to nil at the end of the term of the assurance period which has been set.
What type of person selects decreasing life assurance?
Most people who decide to choose this type of policy will use it to go alongside a loan of some sort, usually a repayment mortgage, tying in with the decreasing nature of the loan so that they finish at the same point. As the cover that you get with decreasing life assurances goes down over the term of the policy, the cost of the policy which is generally known as the premium will remain the same over the length of the term of the policy.
You may also be able to add on other features which maybe helpful to you such as a cover that will provide help if you have a critical illness like cancer or Parkinson's disease. This can be added on at an additional premium or cost but are usually quite expensive; however they will pay out if the person is diagnosed with these any of these illnesses during the term of this type of life assurance.
Advantages of decreasing life assurance
The benefits of this type of policy are that it tends to be a cheaper option than other life assurance policies because of the less cover you get towards the latter end of the policy. Also it is very good if you want to give your loved ones a lump sum payment to pay off your loan or mortgage after you pass away and know that it is going to pay off just the right amount.
Disadvantages of decreasing life assurance
The disadvantages of this type of policy are that like other life assurance policies, it doesn't have any cash in value if you happen to survive the maturity of the policy or at any time of the policy. It will also only pay out the lump sum if you die during the term of the policy or if you have a critical illness, if you have that type of assurance added on to the policy. It will also not give you any extra other than what the policy is valued at the time of the claim, so it will pay off the loan or mortgage but will not give you much else after that unless you specifically plan it in when you set up the decreasing life assurance.