In short
Decreasing term insurance pays a lump sum that reduces over time, usually broadly in line with a repayment mortgage balance.
A decreasing term policy starts with a chosen sum assured that falls over the term. The shape of the reduction is usually designed to track a typical repayment mortgage, taking an assumed interest rate into account, which is why it is sometimes called mortgage life insurance.
Because the amount at risk falls over time, decreasing term cover is normally cheaper than level term for the same starting amount. It is most often used to protect a capital and interest mortgage, where the loan reduces each month.
One thing to watch is the assumed interest rate. If your mortgage rate is much higher than the rate the policy assumes, the cover may fall slightly faster than your loan, leaving a small shortfall. The policy is not tied to a specific mortgage account, so it continues even if you change lender.
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