Decreasing term life insurance for two: Secure your shared future smartly and optimise premiums
30.05.25
11
Minutes
Katrin Straub
Managing Director at nextsure
A joint loan, two lives, one need for protection: term life insurance with a decreasing sum assured for two people often offers a cost-effective solution. Find out how you can protect your partner in the event of the worst happening and which aspects you must definitely bear in mind in order to save up to thirty per cent on premiums.
The topic in brief and concise terms
A decreasing term life insurance policy for two protects partners with joint loans, with the sum assured decreasing over time and premiums often lower than with two individual policies.
Important drawbacks can be the one-off payout and a lack of flexibility in the event of separation; alternatives such as two separate contracts or cross-linked models should be considered.
Pay attention to contract details such as guaranteed insurability, indexation and tax treatment, especially inheritance tax, to ensure optimal protection.
Understanding the basics: decreasing term life insurance for couples
A decreasing term life insurance policy for two people, often structured as a joint term life policy, covers both partners under a single contract. The sum insured, which is paid out if one partner dies, decreases over the term of the policy – ideally in parallel with the repayment of a shared loan, for example a mortgage of €250,000. If one partner dies, the other receives the currently valid sum insured, after which the contract usually ends; a second benefit upon the later death of the other partner is usually not paid. This option is often cheaper than two separate policies with a fixed sum insured. The decreasing sum can be designed on a linear, annuity-based or progressive basis, with the annuity-based version following the repayment pattern of an amortising loan. A careful needs analysis is essential in order to determine the appropriate level of cover and term, which often amounts to 20 years or more.
Maximising benefits: when a joint policy pays off
The main advantage of a decreasing term life policy for two is often the lower total premiums compared with two separate policies, which can save up to 20 per cent. This model is particularly attractive for couples taking out joint cover for a loan whose outstanding balance decreases over the years. A single policy also means less administrative effort. The decreasing sum assured adjusts to the reducing level of cover required, for example in the case of a property loan of €300,000 with a term of 25 years. For young families or business partners servicing a joint loan, this can be a sensible solution. Optimum family protection always takes the individual situation into account. Joint cover can ensure the financial stability of the surviving partner, for example by allowing monthly repayments of €1,200 to continue to be met. The precise structure of the decreasing sum, whether linear or annuity-based, should match the loan repayment schedule. This ensures that the protection gap remains minimal.
Recognising potential pitfalls: weighing up disadvantages and alternatives
Despite the cost advantages, a joint decreasing term life insurance policy also has disadvantages. A key point is the lump-sum payout: if one partner dies, the policy ends and the surviving partner no longer has their own death benefit cover. This can be problematic if cover is still needed, for example for children. A new policy is then often more expensive because of the increased age and any new health risks. In the event of separation or divorce, it is usually not possible to divide the joint policy, which can lead to cancellation and the loss of cover for both. If the partners' risk profiles differ greatly (e.g. one smoker, one non-smoker), two separate policies can be fairer despite the higher total cost and sometimes even cheaper, because the premium for the partner with the lower risk is lower. An alternative is two separate term life insurance policies, which offer more flexibility. These can also be arranged as "cross-insurance" to avoid inheritance tax traps, especially for unmarried couples with allowances of only 20,000 euros. You should therefore carefully weigh up whether the premium saving of, for example, 15 euros a month outweighs the reduced flexibility.
Important considerations when deciding:
Before deciding on a joint policy, you should check the following points:
How much cover does each individual partner need over the entire term?
Will the other partner still need cover after one partner's death, e.g. for children or their own loans?
How likely is a separation, and what consequences would this have for the insurance cover?
Are there major differences in health or risk behaviour (smoking, dangerous hobbies) that could make separate policies cheaper? A 50% risk loading for a smoker can make an individual policy more attractive for the non-smoker.
Is inheritance tax an issue? For unmarried couples, a cross-insurance arrangement with two separate policies can be more advantageous in order to make optimal use of the €500,000 allowances for spouses.
These questions will help you find the best long-term solution for your individual situation.
Practical check: cost factors and calculation examples
The cost of decreasing term life insurance for two depends on several factors: the age and health of both insured persons, occupation, smoking habits, sum insured, policy term, and the way the sum decreases (e.g. linearly by five percent per year). A non-smoking couple aged 30 who wants to secure a loan of 200,000 euros over 20 years may pay from 15 euros per month. A 40-year-old couple with one smoker could already pay 35 euros or more for the same cover. Medical underwriting is a key factor; truthful information is essential to avoid jeopardising the insurance cover. Compare offers carefully: some insurers offer more favourable terms for certain professional groups or for a healthy lifestyle. Term life insurance without medical underwriting is rare and usually associated with higher premiums or lower benefits. Choosing the right term is also crucial; it should at least match the loan term, often 20 to 30 years. A term that is too short can leave a dangerous coverage gap. An example calculation: with an annuity-style decreasing sum insured that protects a loan of 250,000 euros at four percent interest and two percent repayment over 25 years, the sum insured in the event of death would still be around 180,000 euros after ten years. An accurate calculation is important for optimal protection.
Expert tips: optimising contract details and legal aspects
When concluding the contract, pay attention to important clauses. The guaranteed insurability option allows the sum insured to be increased following certain life events (e.g. the birth of a child, buying a property) without a new health check, often by up to EUR 25,000 per event. An indexation option adjusts premiums and the sum insured annually to offset inflation, usually by three to five per cent. Check the conditions for the death benefit payment: What documents are required and how quickly is the benefit paid? The rules on early termination and the conversion option into an endowment life insurance policy (if desired and offered) should be clear. Our expert tip: clarify the tax treatment. Premiums may be tax-deductible as retirement provision expenses, but the maximum amounts (EUR 1,900 for employees, EUR 2,800 for the self-employed) are often already used up by health and long-term care insurance contributions. The death benefit itself is exempt from income tax, but it can trigger inheritance tax. With a joint policy, where both partners are policyholders and beneficiaries, inheritance tax may be due when the benefit is paid if the allowances (e.g. EUR 500,000 for spouses, EUR 20,000 for unmarried partners) are exceeded. Advice can help to structure these aspects optimally.
Checklist for concluding the contract:
You should check these points before signing:
Is the sum insured sufficient to cover all liabilities (loan, living expenses) for at least three to five years?
Does the term match the duration of the financial obligations (e.g. loan term plus a two-year buffer)?
Have the health questions been answered fully and truthfully to avoid exclusions from cover?
Is there a guaranteed insurability option and are its conditions suitable (e.g. an increase of EUR 50,000 on marriage)?
Is a premium indexation included and desired to counteract loss of purchasing power (e.g. annual adjustment by four per cent)?
What are the cancellation terms and is there a conversion option if needs change?
Are the rules on benefit refusal (e.g. in the event of suicide in the first three years) clearly understandable?
Has the tax situation, especially inheritance tax, been taken into account and, where applicable, optimised through the contract structure?
A thorough review of these aspects gives you the best possible protection.
Special case credit protection: Tailor-made solutions for loans
Decreasing term life insurance for two is particularly well suited to securing joint loans, such as a mortgage. The falling sum insured should ideally track the remaining loan balance. An annuity-style decreasing sum is often the best choice here, as it most accurately reflects the repayment profile of an annuity loan with, for example, 4 per cent interest and an initial 2 per cent repayment. Banks often require such cover as security for the loan. It is important that the sum insured never falls below the current outstanding balance, to avoid underinsurance. So plan for a buffer of around ten per cent. With two borrowers, the question is whether a joint policy or two individual policies make more sense. If both incomes are needed to service a loan of, for example, 2,500 euros per month, a joint policy may be sufficient. If one partner earns significantly more, individual sums in separate policies may be better. The term of the insurance should at least match the loan term, often 25 or 30 years. An alternative to term life insurance is loan repayment insurance, but this is often more expensive and pays the lender directly. Term life insurance pays out to the beneficiaries, who are free to use the money as they wish. Careful coordination of the insurance and the loan is the key to optimum protection.
Choosing the right term life insurance, especially a decreasing term life policy for two, requires a careful analysis of your personal circumstances and financial goals. There is no single perfect solution for all couples. Factors such as shared children, differing incomes, existing debts of, for example, over 100,000 euros, and individual risk tolerance play a major role. Professional advice can help you avoid pitfalls and design tailored cover that really works when it matters and provides optimal protection for your loved ones. Take the opportunity to compare different term life insurance quotes. nextsure helps you find the cover that’s right for you. We analyse your needs and present transparent solutions. That way, you can be sure your shared future is protected as well as possible. Request your personalised risk analysis now.
Request your personalised risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for improvement.
More useful links
The Federal Statistical Office (Destatis) provides life tables for Germany, which supply important demographic data.
The Consumer Advice Centre offers comprehensive information and guides on term life insurance and its protection in the event of death.
The Bundesbank publishes studies on the economic situation of private households, providing insights into financial circumstances.
You can also find reports from the Bundesbank on the assets and finances of private households in Germany.
Current press releases from the Federal Statistical Office (Destatis) provide information on relevant statistical data.
The Consumer Advice Centre Lower Saxony explains who term life insurance is particularly important for and which aspects should be considered.
The Federal Health Reporting (GBE-Bund) offers detailed information on life expectancy in Germany.
FAQ
Who is decreasing term life insurance for two especially suitable for?
It is particularly useful for couples (married or unmarried) and business partners who want to secure a loan with a decreasing outstanding balance together, such as property financing. It often provides cost-effective cover in the event that one of the partners dies.
What does 'decreasing in line with repayments' mean in term life insurance?
Decreasing on an annuity basis means that the insured sum decreases in the same way as the outstanding balance of an annuity loan (a loan with constant instalments) is typically repaid. At the start, the sum decreases more slowly, and towards the end of the term more quickly. This aligns well with the course of many property loans.
Can a joint term life insurance policy be tax-deductible?
Contributions to a linked term life insurance policy can be claimed as other precautionary expenses in the tax return. However, the maximum amounts (e.g. EUR 1,900 for employees) are often already exhausted by contributions to health and long-term care insurance, so there is usually no tax effect, or only a minor one.
What is the difference between a linked term life insurance policy and a cross term life insurance policy?
With a joint term life insurance policy, there is one contract for two people; the benefit is paid out only once upon the death of the first partner. With cross-insurance, both partners each take out their own separate policy, with the other partner named as the insured person. This can bring tax advantages and covers both deaths.
Does the decreasing term life insurance for two also pay out if both partners die at the same time?
In the case of a linked term life insurance policy, the sum insured is usually paid out only once, even if both partners die at the same time or shortly one after the other. The exact terms and conditions can be found in the respective policy. Two separate individual policies would pay out twice in such a case.
How long should the term of a decreasing term life insurance policy for two people be?
The term should at least match the duration of the financial obligation to be covered. In the case of loan protection, this is usually the term of the loan, often 20, 25 or 30 years. It is advisable to allow for a small time buffer.
