What is level term assurance?

Level Term Assurance is life cover that stays level throughout the term of the plan.

As with an Interest Only mortgage, (where the mortgage balance remains constant throughout the term), the level of life insurance within a Level Term Assurance policy remains constant too. Thus, ensuring that in the event of a death during the term, the policy would pay out enough to repay the mortgage.

This can be seen from the illustration below:

A Level Term Assurance policy could also be used to cover a Capital Repayment mortgage, as it would pay out at least the amount required to repay the mortgage in the event of a death – particularly in the latter years. However, this option is usually more expensive, so it is sensible to obtain professional advice to ensure you get good value for money.

It should be noted that should you have an interest only mortgage, Decreasing Term Assurance is unsuitable as this cover will reduce throughout the term of the debt leaving you underinsured. So, in the case of an Interest Only mortgage, Level Term Assurance is the only suitable option to fully protect the mortgage.

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