Level term assurance is life
cover that stays level throughout the term of the plan.
The term element in the name means that it can be taken
out for a specified period of time and in the case of a
mortgage this would coincide with the term of the debt
ie the final repayment date for example 25 years.
This type of cover is best suited to interest only
mortgages. As the size of the debt stays constant
through the term the level of life insurance cover needs
to remain constant also. This can be seen from the
diagram below of an interest only mortgage:-
Level term assurance can also be used to cover capital
repayment mortgages, even though it is predominantly
used with interest only mortgages.
It should be noted that should you have an interest only
mortgage mortgage protection insurance or decreasing
term assurance is wholly unsuitable as this cover will
reduce throughout the term of the debt leaving you
grossly underinsured. So in the case of an interest only
mortgage level term assurance is the only suitable
option to insure the mortgage.
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