How does the AXA decreasing term assurance work?

Hi anon,

Decreasing term insurance works on the priciple that they will cover your outstanding mortgage amount, provided you provide the correct parameters. AXA's decreasing terma assurance would fall into this category.

Since mortgage loans are amortizing, with a fixed interest, it is possible to know how much outstanding mortgage you have, year on year. Decreasing term assurance will pay this amount upon death/TPD. Hence, the payable benefits drop year by year.

You may compare them across different insurers as long as the parameters are the same. However, you can also consider the possibility of level term insurance which provides a fixed payout through the duration of the policy. Such insurance has come down in cost over the years and can be very competitive. So with a mortgage of $1mio, a mortgage insurance may pay your family $50K in the final year upon death/TPD, but a level term will still pay $1mio even in the last year. Premium difference might be very small. Considering that besides paying off the mortgage, money might still be needed to be left behind for the family, a level term insurance is an option you might want to consider.

Hi Anon,

AXA Decreasing Term Assurance is a mortgage insurance. There is no significant difference between it and ordinary mortgage insurance.

How it works is that the Sum Assured of the policy chosen by you will decrease every year.

For example:

Year 1 Sum Assured = $1,000,000

Year 2 Sum Assured = $972,500

Year 3 Sum Assured = $940,667

Year 4 ...

...

It will go on until the mortgage term reaches the end of the policy term and expires. This type of term plan is useful to cover the mortgage of a house since the mortgage will decrease over time as you pay off the mortgage.

For comparison, there are a few other insurers that offer mortgage reducing term insurance such as Aviva, eTiQa, ManuLife, and NTUC. The main criteria for comparison should be the annual premium, since this is a term plan.

Hope this answers your question :)