Level Term Assurance

This type of life insurance is typically used to cover a fixed debt, such as an interest only mortgage. With an interest only mortgage, the amount of capital owed on the mortgage remains constant for the term of the mortgage (assuming no overpayments are made). As the amount of debt remains fixed throughout the term of the mortgage, the life insurance would need to pay out the same fixed amount on death of the policyholder(s) during the term of the policy.

A level term assurance policy would be needed to cover an interest only mortgage. If a level term assurance policy was used on a repayment mortgage, then as the capital was reduced on the mortgage, the policy would provide a surplus on death, equal to the sum assured, less the remaining capital owed on the mortgage.

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