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Decreasing term assurance

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  Much like level term assurance in so much as it runs for a specified period of time but this type of cover decreases.

Basically the sum assured reduces each year. This type of cover is taken out for many reasons such as to cover repayment mortgages and other decreasing liabilities and it is also used in inheritance tax planning.

Decreasing term assurance for inheritance tax planning is known as a gift inter vivos policy. If you make a gift to someone and your estate is potentially taxable for inheritance tax then the beneficiary of your gift could be faced with a tax bill over the next 7 years if you were to die. This potential bill reduces each year for the 7 and it is for this reason that a form of decreasing term assurance called gift inter vivos is used.

This type of decreasing term assurance decreases in line with the outstanding inheritance tax bill that someone might have in the event they had just gifted a portion of their estate to another. Unlike ordinary decreasing term cover were the reduction is more gradual gift inter vivos policies reduce in steps at exactly the same rate that the tax bill reduces.

It is important to ensure if you are taking out any type of decreasing term assurance, that the need is also decreasing because as time goes by the amount your beneficiaries will get out of the plan should you die will decrease each year and if the liability does not for any reason they will be left with insufficient funds to meet that liability.

As with all types of life cover, critical illness cover and waiver of premium benefit can be built in it is a selection within our quote form so select it on one of your quotes to see if it is worth having.


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