Decreasing Term Life for Two: Secure a Shared Future Cleverly and Optimise Contributions
30 May 2025
3
Minutes
Katrin Straub
CEO at nextsure
A joint loan, two lives, one need for protection: The decreasing term life insurance for two people often offers a cost-effective solution. Learn how to protect your partner in the event of an emergency and which aspects you must absolutely consider to save up to thirty percent on premium costs.
The topic in brief and concise terms
A decreasing term life insurance for two provides security for partners with joint loans, with the sum insured decreasing over time and premiums often being lower than with two individual policies.
Important disadvantages can include the one-time payout and lack of flexibility in case of separation; alternatives such as two individual policies or cross-models should be considered.
Pay attention to contract details such as continuation guarantee, indexation, and tax treatment, particularly inheritance tax, to ensure optimal protection.
Understanding the basics: The decreasing term life insurance for couples
A decreasing term life insurance for two people, often structured as a joint term life insurance, insures both partners under a single contract. The sum insured, which is paid out in the event of one partner's death, decreases over the contract term – ideally in parallel with the repayment of a joint loan, such as a mortgage of €250,000. If one partner dies, the other receives the current insured amount, causing the contract to usually terminate; a second payout upon the subsequent death of the other partner typically does not occur. This variant is often cheaper than two separate policies with a constant sum. The decreasing sum can be designed to be linear, annuity-based, or progressive, with the annuity-based variant aligning with the course of a repayment loan. A careful needs analysis is essential to determine the appropriate level of coverage and term, which often lasts 20 years or more.
Maximizing benefits: When a joint policy pays off
The main advantage of a decreasing term life insurance for two often lies in the lower overall premiums compared to two individual policies, which can allow savings of up to 20 percent. This model is particularly attractive for couples who jointly secure a loan, the outstanding balance of which decreases over the years. One contract also means less administrative effort. The decreasing insurance sum adapts to the diminishing need for coverage, for example, with a property loan of 300,000 euros over a 25-year term. For young families or business partners servicing a joint loan, this can be a sensible solution. An optimal family protection always takes individual circumstances into account. Joint coverage can ensure the financial stability of the surviving partner by enabling them to continue meeting monthly payments of, for example, 1,200 euros. The exact design of the decreasing amount, whether linear or annuity-based, should match the repayment plan of the loan. This ensures that the coverage gap remains minimal.
Identifying Potential Pitfalls: Weighing Disadvantages and Alternatives
Despite the cost benefits, joint decreasing term life insurance also has some drawbacks. A key issue is the one-time payout: if one partner passes away, the policy terminates, and the surviving partner no longer has their own death cover. This can be problematic if there is still a need for protection, for example, for children. A new policy is often more expensive due to increased age and potential new health risks. In the event of separation or divorce, it is often not possible to split the joint policy, which may lead to cancellation and loss of insurance cover for both. If partners have very different risk profiles (e.g. one smoker, one non-smoker), two separate policies, despite higher overall costs, can be fairer and sometimes even cheaper, as the premium for the partner with lower risk is lower. An alternative is two individual term life insurances, which offer more flexibility. These can also be set up as a "cross-policy" to avoid inheritance tax pitfalls, especially for unmarried couples with allowances of just €20,000. Therefore, carefully weigh whether the premium savings of, for example, €15 monthly outweigh the lower flexibility.
Important considerations when making a decision:
Before you decide on a joint policy, you should consider the following points:
What is the level of coverage required by each partner throughout the entire duration?
Is there still a need for protection for the other partner after one partner's death, e.g. for children or personal loans?
How likely is a separation, and what consequences would this have for the insurance cover?
Are there significant differences in health status or risk behaviour (smoking, dangerous hobbies) that could make separate policies cheaper? A risk surcharge of 50 percent for a smoker may make an individual policy more attractive for the non-smoker.
Is inheritance tax an issue? For unmarried couples, a cross-policy setup with two individual policies may be more advantageous to make the most of the €500,000 allowances for spouses.
These questions help to find the best long-term solution for your individual situation.
Practice Check: Cost Factors and Example Calculations
The cost of a decreasing term life insurance policy for two people depends on several factors: the age and health status of both insured individuals, their profession, smoking habits, sum insured, duration, and the method of sum reduction (e.g., decreasing linearly by five percent annually). A non-smoking couple aged 30 seeking to secure a loan of 200,000 euros over 20 years might pay from 15 euros monthly. A couple aged 40 with a smoker might already pay 35 euros or more for the same coverage. The health check is a crucial factor; truthful information is essential to avoid jeopardising the insurance coverage. Compare offers carefully: some insurers offer more favourable terms for certain occupations or healthy lifestyles. Term life insurance without a health check is rare and usually associated with higher premiums or lower benefits. Choosing the right duration is also crucial; it should at least match the loan duration, often 20 to 30 years. A term that is too short can leave a dangerous coverage gap. An example calculation: for an annuity-decreasing sum insuring a loan of 250,000 euros with four percent interest and two percent repayment over 25 years, the sum insured would still be around 180,000 euros in the event of death after ten years. Accurate calculation is important for optimal protection.
Expert tips: Optimize contract details and legal aspects
Pay attention to important clauses when signing a contract. The guaranteed proof allows increasing the insurance amount during certain life events (e.g., birth of a child, property purchase) without a new health check, often by up to 25,000 euros per event. A dynamic option adjusts contributions and insurance amounts annually to account for inflation, usually by three to five percent. Check the conditions for the payout in case of death: What documents are required and how quickly is the payment made? The regulations for early cancellation and the option to convert into a whole life insurance (if desired and offered) should be clear. Our expert tip: Clarify the tax treatment. Contributions may be deductible as pension expenses; however, the maximum amounts (1,900 euros for employees, 2,800 euros for self-employed) are often already exhausted by health and nursing insurance contributions. The death benefit itself is income tax-free but may trigger inheritance tax. In the case of a joint policy, where both partners are policyholders and beneficiaries, inheritance tax may apply in the event of a claim if the exemptions (e.g., 500,000 euros for spouses, 20,000 euros for single persons) are exceeded. Consultation helps to optimally design these aspects.
Checklist for signing the contract:
These points should be checked before signing:
Is the insurance amount sufficient to cover all liabilities (credit, living expenses) for at least three to five years?
Does the term of the policy correspond to the duration of financial commitments (e.g., loan term plus a buffer of two years)?
Have the health questions been answered completely and truthfully to avoid exclusions of benefits?
Is there a guaranteed proof and are its conditions suitable (e.g., increase by 50,000 euros upon marriage)?
Is a contribution dynamic included and desired, to counteract loss of purchasing power (e.g., annual adjustment by four percent)?
What are the cancellation conditions and is there an option for conversion if needs change?
Are the rules regarding refusal to perform (e.g., in the event of suicide within the first three years) clearly understandable?
Has the tax situation, particularly the inheritance tax, been considered and possibly optimized through contract design?
A thorough review of these aspects ensures you the best possible protection.
Special Case Loan Protection: Tailored Solutions for Loans
The decreasing term life insurance for two is particularly suited for securing joint loans, such as a mortgage. Ideally, the decreasing insurance sum should follow the trajectory of the loan's remaining debt. An annuity-style decreasing sum is often the best choice here, as it most accurately reflects the repayment schedule of an annuity loan with, for example, four percent interest and an initial two percent repayment. Banks often require such insurance as collateral for the loan. It is important that the insurance sum never falls below the current remaining debt to avoid underinsurance. Therefore, plan for a buffer of about ten percent. For two borrowers, the question arises whether a joint policy or two individual contracts are more sensible. If both incomes are necessary to service the loan of, for instance, 2,500 euros monthly, a joint policy may suffice. If one partner earns significantly more, individual sums in separate contracts might be better. The insurance term should at least match the loan term, often 25 or 30 years. An alternative to term life insurance is the loan protection insurance, which is often more expensive and pays directly to the lender. The term life insurance pays out to the beneficiaries, who have more freedom over the money. Careful coordination of insurance and loan is the key to optimal protection.
Your personalised risk analysis: Finding the optimal protection
Choosing the right term life insurance, especially a decreasing term for two people, requires a thorough analysis of your personal situation and financial goals. There isn't one perfect solution for all couples. Factors such as having children together, different income levels, existing debts like those over €100,000, and individual risk appetite play a significant role. Professional advice can help you avoid pitfalls and create a customized insurance cover that truly works in an emergency and provides optimal protection for your loved ones. Take the opportunity to compare various term life insurance offers. nextsure supports you in finding the right coverage for your needs. We analyse your needs and offer transparent solutions. This way, you can be sure that your shared future is protected in the best possible way. Request your individual risk analysis now.
Request an individual risk analysis now: Get a free review of your insurance situation and receive specific optimization suggestions.
More useful links
The Federal Statistical Office (Destatis) provides mortality tables for Germany, offering important demographic data.
The Consumer Advice Centre offers comprehensive information and guides on term life insurance and the protection it provides in the event of death.
The Bundesbank publishes studies on the economic situation of private households, providing insights into financial circumstances.
Also from the Bundesbank, you will find reports on the assets and finances of private households in Germany.
Current press releases from the Federal Statistical Office (Destatis) inform about relevant statistical data.
The Consumer Advice Centre of Lower Saxony explains for whom term life insurance is particularly important and what aspects need to be considered.
The Federal Health Reporting (GBE-Bund) provides detailed information on life expectancy in Germany.
FAQ
Who is a decreasing term life insurance for two particularly suitable for?
It is particularly useful for couples (married or unmarried) and business partners who wish to jointly secure a loan with a decreasing balance, such as real estate financing. It often provides a cost-effective protection in the event that one of the partners passes away.
What does 'annuitätisch fallend' mean in term life insurance?
Annuity-based decreasing means that the insurance sum decreases in the same way as the remaining debt of an annuity loan (loan with constant installments) is typically repaid. At the beginning, the sum decreases more slowly, accelerating towards the end of the term. This aligns well with the course of many mortgage loans.
Can a linked term life insurance policy be tax-deductible?
The contributions towards a joint term life insurance policy can be claimed as other precautionary expenses in the tax return. However, the maximum limits (e.g., 1,900 euros for employees) are often already exhausted by contributions to health and long-term care insurance, resulting in little or no tax impact.
What is the difference between a joint term life insurance and a cross term life insurance?
In a joint term life insurance policy, there is one contract for two people; the payout occurs only once upon the death of the first partner. In a cross-insurance, both partners enter into their own contracts where the other partner is the insured person. This can offer tax advantages and covers both deaths.
Does the decreasing term life insurance pay for both if both partners die at the same time?
In a joint life insurance policy, the sum assured is usually paid out only once, even if both partners pass away simultaneously or shortly one after the other. The exact conditions can be found in the respective contract. Two separate individual policies would pay out twice in such a case.
How long should the term of a decreasing term life insurance for two be?
The term should at least match the duration of the financial obligation being secured. In the case of loan protection, this is usually the term of the loan, often 20, 25, or 30 years. It is advisable to include a small time buffer.
